IFC Unveils a New Initiative to Help Financial Institutions in Europe Manage Climate Risks

• Climate-related disasters across Europe caused losses of about €650 billion over the past 40 years.
• European regulatory framework is encouraging financial institutions to integrate climate risk in decision making.
• To help financial institutions build capacity on climate resilience, IFC, the first among the multilateral development institutions, unveils a new initiative called ClimaLab.

Vienna, September 2, 2024—A pioneering initiative that will help equip financial institutions with knowledge, tools, and skills to manage climate-related risks is being launched in Europe by IFC.

Climate-related disasters across Europe caused losses of about €650 billion, or around €15.5 billion per year from 1980 to 2022. Losses of financial institutions have also been significant. The World Bank's global research shows that non-performing loans ratios are estimated to increase by 0.37 percentage points after severe climate and environmental disaster episodes. The region's projected climate change impacts call for urgent action to improve resilience. Therefore, the European Union regulatory framework is encouraging banks to integrate climate risk in decision making and focus on managing risks in their loan portfolios while financing sustainable initiatives.

To help financial institutions build a robust climate risk management plan, IFC is launching ClimaLab, an initiative implemented in partnership with the government of the Netherlands. The first of its kind by a multilateral development institution, ClimaLab comprises a range of climate-focused programs designed to help banks build capacity on climate resilience and better integrate climate and sustainability measures into their management. The programs are being tailored to the needs of different regions.

The aim is to enable financial institutions to develop the knowledge and skills necessary to understand the impact of climate risks on their portfolios, explore opportunities for sustainable investments, and design robust strategies for their transformation journey.

"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 Latin America and 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."

IFC is currently piloting ClimaLab with select banks in the region to refine its curriculum and materials for the optimal impact. Financial institutions interested in participating in future ClimaLab cohorts, can submit their application to climalab@ifc.org.

The official cohort of ClimaLab in Europe will start in November, focused on climate risk management and the Paris Agreement goals. Developed by IFC and Management Solutions, an international business consulting firm, it will focus on helping financial institutions assess climate-related risks, incorporate them into required disclosures and sustainability reports and, ultimately, develop a transition and adaptation strategies aligned with regulatory expectations.

About IFC

IFC — a member of the World Bank Group — is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2024, IFC committed a record $56 billion to private companies and financial institutions in developing countries, leveraging private sector solutions and mobilizing private capital to create a world free of poverty on a livable planet. For more information, visit www.ifc.org. 

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