The scientific consensus is that human activities have had a significant impact on climate change over the past 200 years. The Paris Climate Change Agreement was implemented to attempt to mitigate climate change and its projected effects, namely mass migration. The Agreement specifies that the financial sector must track investments that are financing activities that help to mitigate climate change, or detract from this goal. Monitoring can help assess the extent of transition risk, including stranded asset risk, which can be a shock to the financial markets if the “carbon bubble” bursts.
Key learning objectives:
Explain how the financial sector can help mitigate climate change, according to the Paris Climate Change Agreement
Explain how banking and finance are impacted by climate change
Define stranded asset and how they pose a risk to the economy