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A Systematic Review of Climate Risk Integration in Banking Risk Management

A Systematic Review of Climate Risk Integration in Banking Risk Management
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Author(s): Jiafan Li (University of Huddersfield, UK)and Erhan Kilincarslan (University of Huddersfield, UK)
Copyright: 2026
Pages: 34
Source title: Impacts of Climate Risk and Energy Consumption on Financial Markets
Source Author(s)/Editor(s): Abdelkader Mohamed Sghaier Derbali (Taibah University, Saudi Arabia)
DOI: 10.4018/979-8-3373-6766-8.ch013

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Abstract

This chapter presents a systematic literature review of 54 peer-reviewed studies on how commercial banks integrate climate-related risks into their risk management frameworks. Drawing upon institutional, agency, stakeholder, and resource-based theories, the analysis identifies three interrelated dimensions of bank responses: climate adaptation, loan pricing, and climate risk disclosure. Findings reveal that banks, particularly in China and the European Union, increasingly incorporate environmental considerations into strategic and operational decisions through green credit, ESG engagement, digital innovation, and board diversity. However, persistent challenges, such as symbolic compliance, brown lending, and uneven regulatory enforcement, limit substantive progress. The review highlights how institutional pressures, managerial incentives, stakeholder expectations, and organisational capabilities jointly shape banks' climate behaviours.

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