• European financial institutions face increasing climate-related risks, with losses reaching €650 billion over the past 40 years.
• IFC’s ClimaLab initiative aims to strengthen banks’ capacity to manage climate risks and seize sustainable investment opportunities.
• ClimaLab is a pioneering effort to align financial institutions with climate resilience and regulatory requirements.

European financial institutions are grappling with significant climate-related risks, leading to substantial financial losses and regulatory pressures. To address these challenges, the International Finance Corporation (IFC) has launched a groundbreaking initiative called ClimaLab, aimed at enhancing climate resilience in the banking sector.

From 1980 to 2022, climate-related disasters resulted in approximately €650 billion in losses across Europe, averaging €15.5 billion annually. The financial sector has also felt the impact, with non-performing loans rising by 0.37 percentage points following severe environmental disasters. As climate change accelerates, the European Union is pushing banks to integrate climate risk into their decision-making processes and manage their loan portfolios with a sustainability focus.

IFC’s ClimaLab, developed in partnership with the Netherlands government, is the first initiative of its kind by a multilateral development institution. It offers tailored programs to help banks build expertise in climate risk management and sustainability integration. This initiative aims to equip financial institutions with the tools and knowledge to assess climate risks, identify sustainable investment opportunities, and develop strategies for a low-carbon future.

“Climate change poses a significant financial risk to economies, and financial institutions play a crucial role in mitigating this risk,” said Liliana Pozzo, IFC Sustainable Finance Advisory Services Manager for Latin America, the Caribbean, and Europe. “Through ClimaLab, we aim to empower banks and other financial institutions to not only navigate the complexities of climate risk but also seize the opportunities that arise from the transition to a low-carbon economy.“

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ClimaLab is currently being piloted with select banks in Europe to refine its curriculum and materials. The official cohort will launch in November, focusing on aligning financial institutions with the Paris Agreement goals and improving climate risk management.

ClimaLab represents a crucial step towards bolstering Europe’s financial resilience against climate change. By enhancing banks’ ability to manage climate risks and comply with regulatory expectations, IFC aims to foster a more sustainable and economically secure future.