Climate risk and banks’ loans to firms
- Staff Memo
Based on information about emissions and exposure to physical risk from various official Norwegian sources, we determine the share of Norwegian banks’ loans to firms that are exposed to transition risk – consequences of transitioning to a lower-carbon economy – and physical risk – consequences of higher global temperatures. We look at banks’ relative exposures by an emission price increase from today’s level to NOK 2000. We examine the use of energy labeling of commercial property and show how banks’ property collateral can be affected by changes in storm surges and flooding. The mapping is a first step in obtaining a more detailed picture of how climate changes can impact risk in Norwegian banks in the years ahead. Important questions remain for further analysis, both linked to the effects of the transition to lower emissions and to the overview of the economic consequences of physical climate changes.
Staff Memos present reports and documentation written by staff members and affiliates of Norges Bank, the central bank of Norway. Views and conclusions expressed in Staff Memos should not be taken to represent the views of Norges Bank.
ISSN 1504-2596 (online)