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Banks in the GCC region are tackling climate transition risk, but it remains a ‘work-in-progress’
Standard & Poor’s Ratings has this week addressed frequently asked questions about climate transition risk facing banks in the Gulf Cooperation Council (GCC) countries, describing banks’ efforts in measuring the risk to date as a ‘work-in-progress’. On financed emissions, like those covered by RFI Foundation’s financed emissions database, S&P highlighted that “banks' difficulties with measuring scope 3 emissions come up regularly in our discussions”. This is understandable because emissions measurement is an almost universal challenge for banks globally.
This context of data gaps was a motivating factor for the way RFI undertook its financed emissions work, which is catalogued in an open-access database with five years of data covering banks and financial markets in the six GCC countries and five other OIC markets. The financial sector plays a key role in financing the transition and will need substantial new capabilities beyond what they have now to understand the many types of climate transition risk they face from the activities they finance.
IMF report examines climate & stranded asset risks facing banks in MENA and Central Asia
A research paper written by an IMF team examines the readiness, risk and opportunities for the financial sector in the Middle East & North Africa (MENA) and Central Asia and identifies some areas that need particular focus. The evaluation of the region’s preparedness for the climate transition starts by looking at the sources of physical climate risk, transition risk, and the risk related to stranded assets on the region as a whole, including some that have been identified by financial sector supervisors and central bank Financial Stability Reports.
Funding Credible And Bankable Transition Finance After COP28
Following the conclusion of COP 28 last year, OIC financial institutions should now focus on how the final declaration points towards key risks and opportunities arising from climate transition risks, as well as the role they can play within the energy transition. One of the most important elements of financial institutions’ strategies across OIC countries will be the role of transition finance.
This has been a hotly debated issue, all but overlooked by binary green/not-green taxonomies. For emerging markets & developing economies it is a critical piece of amassing enough funding to be able to transform economies in a way that will over time promote economic growth while reducing emissions along science-based pathways.