In a context of wide national and international recognition regarding the risks that climate change presents to the financial sector, key academic actors have joined the international cooperation efforts to develop a roadmap that will guide regulators and other financial entities in carrying out an analysis of environmental scenarios that is consistent with the national context.
In 2018, the World Economic Forum named extreme weather events, natural disasters, and failures to mitigate and adapt to climate change among the top five global risks in terms of probability and impact. Thus, in the last five years, important steps have been taken at the G-20 level to ensure that the financial system considers environmental risks and, consequently, that capital is appropriately allocated to support sustainable economic development.
In Mexico, the average annual cost of natural disasters has increased considerably. In this context, it is imperative that Mexican financial institutions and regulatory authorities take into account the material sources of environmental risks.
To facilitate such a process in Mexico, the Emerging Markets Dialogue on Finance (EMDF) of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, and the Center for Sustainable Finance at Cambridge University’s Cambridge Institute for Sustainability Leadership (CISL) joined forces with the Autonomous Technological Institute of Mexico (ITAM) and Bank of Mexico (Banxico) in a project to promote the publication of a report on the integration of the analysis of environmental scenarios in financial decision-making in October 2018. This project took place in parallel with one carried out in South Africa, in cooperation with the South African Treasury Department. The project results include two roadmaps, tailored for regulators and financial institutions in South Africa and Mexico, on how to develop analyses of environmental scenarios that are relevant in their national contexts.
Finally, with the support of the Mexican-German Climate Change Alliance and Bank of Mexico, the Spanish version of the report “Embedding Environmental Scenario Analysis into Routine Financial Decision-Making in Mexico” is available in Mexico.