Developing a climate adaptation scheme for the GLS bank

Climate change is progressing untamed, urgently requiring us to think about adaptive measures in order to cope with its consequences. The increasing frequency and intensity of extreme weather events like heavy rainfall, storms, wildfires or flooding cause ever higher damage to infrastructure, harvests and human health and these are considered as physical climate risks. Moreover, long-term gradual changes like increasing temperatures, sea-level rise or a reduction in summer precipitation pose yet another challenge to today’s production patterns and ways of life.

In managing these risks, the banking sector takes on a key role: By lending to different sectors of industry, it is itself affected by the whole range of physical climate risks. On the other hand, changes in lending policy can generate spillover effects on corporate and private lenders alike, making the banking sector an important multiplier in climate adaptation. However, as of today the incorporation of physical climate risks in the banking sector’s risk management processes remains – for the most part – insufficient.

This is where the project aims to make a change: Together with the GLS bank, the IÖW will work out – for both the bank as a whole and for single credit users – how physical climate risks in the credit sectors Food and Agriculture, Renewable Energy as well as Construction and Housing can be assessed as well as which adaptive measures can be taken.

As a first step the project team will identify relevant impacts of climate change and analyse relevant risks and opportunities for the GLS bank. In a later step, the GLS bank will incorporate the adaptation scheme developed on the basis of these insights into both the sustainability and general strategy of the bank. In addition, the project aims at raising credit users’ and other banks’ consciousness about climate adaptation. To this end, several seminars and presentations for banks and corporate customers are organized.