The Relationship Between Climate Change and Financial Stability

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Author(s): Joan Mwihaki Nyika (Technical University of Kenya, Kenya)
Copyright: 2021
Pages: 16
Source title: Handbook of Research on Climate Change and the Sustainable Financial Sector
Source Author(s)/Editor(s): Odunayo Magret Olarewaju (Durban University of Technology, South Africa)and Idris Olayiwola Ganiyu (York St. John University, UK)
DOI: 10.4018/978-1-7998-7967-1.ch008

Keywords: Accounting and Finance / Business Science Reference / Environment & Agriculture / Sustainable Development

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Abstract

Climate change is the greatest challenge of the modern day with the capacity to destabilize global financial systems and socioeconomic welfare. This chapter explores the uncertainties posed by climate change, its effects on the economy, the risks associated with the phenomenon, and approaches to manage them through risk management. Using documented evidence, climate change is shown to result in gross domestic product reductions; physical, transition, and liability risks that result to systemic financial problems characterized by liquidation of companies, losses for, and closure of financial firms and their intermediaries; and inability of investors to pay debts. Climate risk management is proposed as a solution to adapt to climate change and reduce its associated risks.

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