Seoul: South Korean banks and other financial institutions could face losses amounting to nearly 46 trillion won (US$31.83 billion) by the year 2100 if the nation fails to adequately address climate change, the central bank announced on Tuesday.
According to Yonhap News Agency, the Bank of Korea (BOK) released this forecast in a report derived from a climate stress test. This test was conducted in collaboration with the Financial Supervisory Service (FSS), the Korea Meteorological Administration, and major financial firms. The findings revealed that under a scenario where the government does not take action to mitigate climate challenges, seven leading local lenders and seven major insurance companies would incur combined losses of 45.7 trillion won by 2100.
The report further indicates that if the government delays implementing net-zero policies until after 2030, the predicted losses would decrease to around 40 trillion won. If the government succeeds in achieving its zero-emission goals by 2050 or reduces carbon emissions by half by that time, the losses would be approximately 27 trillion won.
The BOK emphasized that climate-related issues are anticipated to become a significant risk factor in the future, potentially undermining the financial soundness and stability of banks and insurance firms. The report underscored the necessity to revise risk management guidelines, strengthen measures against unforeseen losses, and promote green investment.
BOK Governor Rhee Chang-yong, speaking at a conference on climate finances in Seoul, stated that appropriate responses to climate challenges could foster eco-friendly technologies and mitigate associated risks, thereby helping financial institutions manage long-term losses more effectively. During the same forum, FSS chief Lee Bok-hyun committed to enhancing financing for low-carbon transitions, supporting smaller firms in their efforts to reduce carbon emissions, and encouraging financial companies to develop climate risk management systems.
South Korea has committed to reducing its greenhouse gas emissions by 40 percent from 2018 levels by 2030 and achieving carbon neutrality by 2050.