The climate is changing. This is a little bit of a play on words. Yes, we know the world is transforming and the impact from rapid climate change will likely be significant to our transformation over the next several years. Some estimates show that a temperature increase of only 1.5° C will result in an 8% reduction in global GDP by 2100. This will inevitably affect physical operations for all of us due to changes in weather-related events such as increased floods, droughts, wildfires, hurricanes and more. Many of us have already experienced these events in our local areas.
Climate change has had an immense impact on regulatory response and how the financial system and prudential policy will address climate related risks, and how these risks will affect safety and soundness. The Financial Stability Board has a roadmap for addressing climate-related financial risks and is working in coordination with the G20 to assess those risks and their impacts to the financial services system. The G20 is coordinating efforts to tackle global challenges such as climate change and environmental protection, and is promoting a transition toward greener, more prosperous and inclusive economies and societies. The Basel Committee also has a roadmap to identify gaps in the Basel framework to determine whether current rules adequately capture climate-related financial risks.
Everything from investments to the regulation of products (think eco-labels), to how you manage your balance sheet and how you govern and run a credit union will likely be affected in the coming years. Yes, the climate is changing, not only physically, but from a regulatory perspective as well. Are you ready?
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