Financial system not adapting to climate risk fast enough
Most credit risk models still assume that insurance remains available and affordable.
Banks are systematically underpricing physical climate risk and could be steering capital into “future stranded assets” unless credit models are fundamentally redesigned, according to a new report.
The University of Cambridge Institute for Sustainability Leadership (CISL) warns that conventional lending frameworks remain anchored in historical data and fail to account for the accelerating impacts of floods, droughts, heatwaves and rising insurance costs.
