The Impact of Climate Change Management on Banks' Profitability

Abstract

Climate change presents significant challenges and opportunities for the banking sector, impacting both risks and profitability. This study examines how effective climate change management influences banks' financial performance. By integrating climate-related risks into their risk management frameworks, investing in green financing, and adopting sustainable operational practices, banks can mitigate adverse impacts and enhance profitability. The research employs a mixed-methods approach, combining quantitative analysis of financial data from major global and regional banks with qualitative insights from case studies and interviews. The findings reveal that banks with proactive climate strategies tend to have more stable financial performance, reduced operational costs, and new revenue streams from green financial products. However, initial investments in sustainable practices can be substantial, and benefits often accrue over the long term. This study highlights the importance of strategic climate risk management in enhancing banks' profitability and provides recommendations for banks seeking to improve their climate resilience and financial outcomes.