The financial services industry has a crucial role to play in the transition to a lower carbon economy. Much has been done in the industry to increase the pace and scope of the response but there is much more to do, according to James Davis, Philipp Mettenheimer and Alban Pyanet, all Principals at Guy Carpenter-affiliate Oliver Wyman.
1. Act on the risks. The report looks in depth at the potential impact of a carbon tax, which Oliver Wyman estimates could drive credit losses of up to USD 1 trillion, and explores other climate risk types. While much is uncertain, it is clear that these risks are material. And yet few firms are systematically factoring them into decision-making today.
2. Seize the opportunity. Oliver Wyman profiles the market in sustainable finance and estimates USD 100 billion+ in new revenue potential, across investing, financing, data and advisory. Those able to move fast and work across boundaries to shape the evolving market are best placed to win.
3. Steer top down. Investor, customer and regulator pressure on financial firms is increasing in many markets. To get ahead of this Oliver Wyman argues that firms need to act proactively to steer capital and show progress in reducing the carbon intensity of the portfolio. More fundamentally, this is an opportunity for the industry to play a leading role in one of the defining issues of the time.