Environmental Hazards and Risk Management in the Financial Sector: A Systematic Literature Review

Abstract

We conduct a systematic literature review on environmental and climate-related risk management in the financial sector. We classify the current literature into three categories: (i) the impact of environmental concerns on financial risk; (ii) the current state of environmental risk practices in the financial sector; and (iii) measures to assess the financial exposure to environmental risks. We find that financial institutions can reduce their risk exposure by highly committing with environmental responsibility and performance. Moreover, the increase in willingness to assess climate-related financial risk incentivizes corporate managers to adopt more proactive environmental policies and practices.