BlackRock is the world’s largest asset manager, so when it speaks, markets and organizations tend to listen.
That’s when BlackRock CEO Larry Fink released his annual letter to CEOs and forecast a “fundamental reshaping of finance” around a new financial model—green finance, or the practice of financing sustainable, environmentally friendly investments.
First, it’s the only way to reduce exposure to assets and organizations that may soon become untenable due in part to the physical effects of climate change.
Second, it’s how financial institutions and the businesses they back can seize a competitive advantage by proactively addressing “transition risk,” which stems from assets and organizations that will inevitably lose market share when climate change impacts consumer preferences.
These factors, combined with regulatory pressure, internal employee advocacy, and shifting consumer sentiment, are giving rise to what Mark Carney, U.N.
Bank of America, JP Morgan Chase, and Citigroup, among others, have committed trillions to the advancement of sustainable finance—defined as sustainability-focused financing, research, and advisory services.
However, despite the growing movement towards sustainable finance, FSIs will continue to fund and interact with “climate-negative” and “climate-exposed” companies and assets.
France’s banking regulator recently piloted the world’s first-ever climate risk stress exercise with nine banks and 15 insurers.
Historically, these organizations have parsed decades of static information to develop rules and guidelines that help them assess risk.
This is where automation and artificial intelligence can help.
In collaboration with regulatory bodies, FSIs need to build frameworks that embed climate risk in all business decisions.
Prior to ServiceNow, she worked for a number of top tier professional services firms, including PwC, KPMG, and Accenture, and consulted with the largest global and Australian local enterprises across banking, telecommunications, and more.