Enhancing Climate Risk Management of Financial Institutions in Belt and Road Investments


The Belt and Road region is one of the most sensitive and vulnerable regions to the climate impacts, and faces great policy pressure for low-carbon transition in the context of global response to climate change. In addition to traditional financial risks, investors also face physical climate risks and transition climate risks when investing in Belt and Road Initiative (BRI) countries. This report combines quantitative and qualitative research to determine how these climate risks will impact BRI investments. Multiple scenarios are analyzed to determine how different climate-related stresses will impact carbon-intensive industries in key BRI countries and to quantify the potential losses for banking institutions regarding investments in those industries. In particular, the energy mix, power systems, carbon prices and impacts on related investments in BRI countries are analyzed under three scenarios: business-as-usual (BAU), nationally determined contribution (NDC), and 2°C warming (2DS). To promote better climate risk management among financial institutions, the report offers constructive suggestions for government departments and financial institutions that would bolster green BRI development. 

(The full report is available in Chinese only. Executive Summary is available in English.)