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In an article published in The Banker, Rémy Estran-Fraioli, CEO of Scientific Climate Ratings (SCR), and Camille Angué, Deputy Director of the EDHEC Climate Institute, explain why climate risks are no longer peripheral but now central to financial stability, as banks are increasingly exposed to both physical and transition risks.
The authors outline how banks are required to fully integrate climate risk into governance, strategy and capital planning, as European Central Bank (ECB) shifts from guidance to enforcement.
The article explores:
– Why non-comparable climate risk modelling and stress testing may prompt a climate-focused targeted review of internal models (TRIM) by the ECB;
– How physical and transition risks are outpacing current models and data systems;
– Why initiatives like EDHEC’s newly established venture, Scientific Climate Ratings, aim to provide a robust, transparent, and actionable framework grounded in science and financial materiality.
“Institutions that treat climate risk management as a purely defensive or compliance-driven task are falling behind. In contrast, those that invest in robust modelling and data-driven strategies can build a real competitive advantage.
“This means developing tailored transition finance products to support clients’ decarbonisation and resilience strategies: encouraging borrowers to safeguard asset quality and investors to expand portfolios that align risk, return, and climate integrity.
“The transition is not just a risk to be managed. It is an opportunity to lead.”
Read the full article.
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