CLIMATE CHANGE AS A BUSINESS RISK: AN INDONESIAN BANKING INDUSTRY PERSPECTIVE

• Main Author: Puspitasari, Indah
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/86727
• Institution: Institut Teknologi Bandung

Climate change has emerged as a new business risk that all corporate organizations, including banks, must evaluate, forecast, mitigate, and manage carefully. Climate change has a substantial influence on finance and business continuity, thus all sectors, including the financial industry, must plan for it. In June 2022, the Basel Committee on Banking oversight (BIS) announced broad principles for banks worldwide for the management and oversight of climate change risk, titled "Principles for the Effective Management and Supervision of Climate Related Financial Risk". Managing Financial Risks related to Climate Risk demands an acceptable management structure and information tools that banks may employ to monitor, measure, and manage asset portfolios influenced by Climate-Related Financial. In addition, this study also aims to assess the readiness of Indonesian banks in implementing the BCBS effective management framework for financial risks related to climate change. This research uses qualitative research. The research methodology employed in this study involves the use of in-depth and semi structured interviews to obtain the subjective narratives and reflections of the participants. The primary objective of these interviews is to gain insight and understanding from professional bankers and regulator in Indonesia, on how climate change risks impact the banking sector. By employing a sample method that involves regulator and selecting banking executives who specialize in risk management. The results of this study provide an explanation of the perspective of Indonesian banks in facing business risks due to climate change, FSA policy related to banking risk management due to climate change, FSA respond to the possibility of adopting the effective management framework for financial risks related to climate change developed by the BCBS from the side, Central Bank’s Perspective on Integration of Climate Risk into Macro Prudential Supervision, Impact on Financial Stability and Economic Resilience, and Policy Recommendations, and The readiness of banks to implement an effective management framework for financial risks related to climate change based on the risk management framework prepared by the Basel Committee on Banking Supervision (BCBS).