Financial Institutions Fail To Acknowledge Climate Change Risks

There seems to be no planning in terms of climate-change when it comes to financial institutions. But it is creating a legal threat by exposing these gaps. In fact, it is Australian lawsuit finding it difficult to turn global warming data into useful advice by investment institutions. On one side, it reflects that there is no alignment between the climate forecasts and their inclusion in risks during investments. And here we are talking about long term forecasts vis-a-vis bigger investments. Like, there are risks of severe droughts or bush fires that could yield a threat years after to your current day’s investment. This is probably world’s first case in an Australian court. The hearing will begin soon. The shareholders of a bank have sued the bank for not disclosing its vulnerability to climate change.

Photo credit: Daniele Zanni via Visual hunt / CC BY-NC-SA

Is it that the financial institutions like this bank in question have no analytics or forecasting capabilities to find out vulnerabilities and threats due to climate change? Obviously, then need to develop these capabilities in that case. Because sooner or later it is going to be a serious legal issue in which they might have to lose even a bigger value than the actual threat.  Logically, all the financial institutions across the globe have been ignorant or slow, intentionally or unintentionally, to acknowledge such risks. Like, the risk that climate change can pose to investments in infrastructure, property, and agriculture. In fact, researchers agree that the lawsuit reflects many serious aspects towards the investors and institutions. As a matter of fact, as of now, Australia and many other countries are unable to forecast the financial risks of climate change.

Financial Institutions Need To Be Proactive

The lawsuit against the Commonwealth Bank of Australia is filed by shareholders Guy and Kim Abrahams on August 8. It says that the institution’s directors’ report 2016 does not sufficiently inform investors of climate-change risks. In fact, their suit also demands a rule to stop the bank from omitting such information in future annual reports.