Why? It can help foster the transition of clients and counterparties, and thus indirectly mitigate climate-related financial risks and ensure consistency with the climate objectives.
How? Outcomes of alignment and climate risks assessments can help an institution identify activities that are not “aligned” with climate objectives or that may be exposed to climate-related financial risks, today or in the future. Engaging with these clients or associated counterparties can help foster the alignment of their portfolio and reduce their exposure to climate-related risk. Within the financial sector, initiatives such as Climate Action 100+ are developing common approaches for institutions to engage with them.