Finance

Quantifying climate change-related credit risk in banking

It is increasingly important for banks to measure the financial risks related to climate change. Financial regulators consider climate risk as an emerging risk. Banks are expected to incorporate climate risk in their risk management practices. Furthermore, multiple regulators have announced stress tests on climate risk. Once specific climate risks are identified, how can risk managers quantify these in their loan portfolios?

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Lessons learned from the ECB climate risk stress test

Banks faced challenges during the climate risk stress test in the first half of 2022. The ECB highlighted that banks should focus on embedding climate risk in the risk management and stress testing framework, improve on the climate data availability and enhance the climate risk modelling capabilities. This blog provides recommendations for these three topics enabling banks to improve their climate risk stress testing capabilities.

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Green Value

Put simply, ESG factors influence the market value of businesses, and companies that fail to factor in ESG requirements will pay the price in sub-par market valuations. More positively, tending to those ESG requirements – including mitigating the impact your business activity has on the environment – will typically add investor appeal. Indeed, some investors will only look at opportunities with green credentials. On the whole, to be green means to protect value – but the correlation isn’t straightforward.

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ESG in Financial Appraisals

At one end of the spectrum, visibly green businesses will secure finance easily, subject to the usual risk considerations, and at the other, heavily carbonised or ‘black’ industries will find it increasingly difficult to obtain funding at a favourable price. In the grey middle, the field remains open, but with more informed and progressive lenders taking a stance on what passes the ESG acceptability test in the eyes of end consumers and the lender’s investors or depositors.

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Eye-opening insights into financing sustainable agriculture

The world of finance is rapidly waking up to the fact that the tried-and-tested methods for calculating value have significant shortcomings. The models we have, work well when determining financial value, but are not great at incorporating environmental and social factors – which we need in order to calculate ”integrated value”. This is a story of how a group of ten students from the RSM Honours Programme studied one of society’s most pressing problems – the sustainability of our agricultural sector – and what banks can learn from the insights they generated.

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A big LEAP towards a nature positive future

The natural world provides the foundation for business activities across virtually all sectors of the economy, underpinning an estimated $44 trillion of global output, according to the World Economic Forum. Nature also gives us food and other raw materials, protects communities from storms and other hazards, and plays a central role in the regulation of the climate.

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The catalyst effect of the finance function on decarbonization

Since carbon tax been officially announced, Dutch companies need to act. The tax will significantly impact the competitive environment, and at the same time offer new opportunities for purpose-led organizations. Because, as has become clear during this COVID-19 crisis, sustainable companies are outperforming their traditional ‘make-take-waste’ peer companies. In this article, we will explore how internal carbon pricing will accelerate a low-carbon future.

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Green bonds, Sustainable or not?

Investing in green bonds is becoming increasingly popular. The amount of specialized investments funds is growing exponentially and new green bonds are mostly heavily oversubscribed. As also seen with the first Dutch green government bond. Also we are enthusiastic about Green bonds, but are also cautious about the potential outgrowth.

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The link between sustainability and tax will need to be stronger

Companies all across the world are contemplating on how sustainability affects them and how they can contribute to achieving the climate goals. Helene Geijtenbeek and Patrick van Min, Tax Partners at Deloitte, see that their clients are absolutely willing to take action. And yet, they do not make the connection with tax, or do not do so enough.

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Connect to Deliver: Making Sustainability Work in Financial Services

The first FSI Sustainability Round Table gathered leaders from across the financial services sector to work together towards creating a sustainable future. The key takeaways? Link ESG goals to your core strategy, start with your biggest challenges, solve them and share your story. Deloitte facilitators Vanessa Otto-Mentz and Hesse McKechnie reflect on the lessons learned and the inspiration that got us here.

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Future of Food: grants, incentives and opportunities

There is no doubt that the agri-food sector is a shining example when it comes to innovation and productivity. However, that doesn’t shield the sector from the major challenges, such as the increasing growth in food demand, the need to produce healthy food, a necessity to improve production methods so as to alleviate the impact on the environment, and the requirement to do all this in a responsible manner.

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Future of food: Responsible waste management

Food waste plays a role in the everyday life of both people and companies. More than one-third of the global food production, amounting to 1.3 billion tons of food, is lost or wasted annually. If no urgent action is taken, global waste will grow by 70 percent by 2050.

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Nature is Next: Towards integrating nature-related risks in the Dutch Financial sector

Nature is declining faster than ever and urgent action is needed to move towards an economy that is in harmony with nature. WWF-NL and Deloitte Netherlands researched how the Dutch financial sector is integrating nature-related risks.

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