In the recent G7 summit, finance misters backed moves to force banks and financial institutions to disclose their exposure to climate-related risks.
So what?
When deciding where to allocate capital, financial institutions need to understand the risks associated with potential assets. By mandating the disclosure of climate-related financial risks, governments are forcing financial institutions to appraise their investments based upon their exposure to these climate related risks. This should ensure that capital is allocated towards climate resilient assets, thus, creating a financial system that is more resilient in the context of a warming world.
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