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21 February 2022 2 min read

Building climate risk into every bit of a bank’s business

How does a major bank prove to the regulators that it’s serious about climate change?

In 2020, the Financial Conduct Authority laid down a challenge to the UK’s big businesses: measure the climate risks of your operations, and tell us what you’re going to do about them.

There was no blueprint for this, and one major UK bank called on Baringa’s in-house climate experts to help.

We built models from the bottom up, and working practices from the top down

We used our award-winning climate scenario model to delve into the bank’s climate footprint. We took account of every asset insured and every penny invested, tracing those threads of impact all the way up, until the bank had a full and robust picture of their climate risk. Then, we built a plan for what to do about it.

We became the consistent force running through the project, making sure that climate knowledge and a plan of action reached every department and global office. We did that by having conversations, and lots of them – reframing things, answering questions, puzzling out problems together. And we did it by training the bank’s board. We knew that by reinforcing their knowledge and bolstering their drive for action, we’d help change cascade into the rest of the business.

The bank overhauled how it worked

The bank’s people built up the knowledge, confidence, and personal drive to tackle climate risk, and keep tackling it. We knew our work together had hit home when one of the client’s team told us he’d changed his own shopping habits.

We baked climate risk into every part of the business: into its decisions about where to lend money. Into the board’s agenda. Into the targets the bank sets itself.

Together, we went beyond regulatory box-ticking. Yes, our client got the approval they needed, but something more fundamental happened too.

“We’ve been very much embedded in the client’s teams, working to solve the problem with them, rather than going away to solve the problem for them. It’s a kind of co-creation.” – Emily Farrimond, Baringa Partner.

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