First Climate Risk Forum Held with Participation of 28 Financial Institutions

First Comprehensive Financial Sector Forum on Climate Risk Response
"Aiming for Practical Discussions"

[Asia Economy Reporter Park Sun-mi] A Climate Risk Forum involving 28 financial institutions has been launched to discuss the current status of climate risk responses by each financial sector and future forum operation plans.

On the 13th, the Financial Supervisory Service (FSS) announced that, together with the Financial Services Commission, it established the Climate Risk Forum to expand awareness and enhance response capabilities related to climate risk within the domestic financial sector.

Climate risk is divided into physical risk, which refers to material damage caused by abnormal climate phenomena, and transition risk, which refers to financial losses occurring during the transition to a low-carbon society. Factors of physical risk and transition risk can affect the value depreciation of collateral assets, increases in default rates and loss rates, as well as stock and bond prices.

This is the first time a comprehensive discussion platform for climate risk response has been created in the financial sector. Banks, financial investment firms, life insurance, non-life insurance, card companies, and capital companies are all participating. This forum aims to conduct practical discussions on climate risk responses in the financial sector based on discussions by major overseas supervisory authorities and international organizations.

The Climate Risk Forum, with participation from 28 financial institutions, held a full meeting online on the same day. Discussions were held on the current status of climate risk responses by each financial sector and future forum operation plans. To facilitate efficient discussions, each sector’s association serves as the secretariat, while research institutes (Financial Research Institute, Insurance Research Institute) and international organizations (UNEP-FI, GCF) participate as advisory groups.

Kim Dong-sung, Deputy Governor of the FSS, stated in his opening remarks that effective climate risk response cannot be achieved by supervisory authorities alone and requires cooperation from the entire financial sector.

Deputy Governor Kim said, "I hope the newly formed Financial Sector Climate Risk Forum will bear meaningful fruit and serve as the vanguard in future climate risk responses. Please actively share excellent cases and know-how related to climate risk response within the financial sector so that not only individual financial companies but the entire financial sector can jointly cope with future crises."

With this forum as a starting point, it is expected that related studies and seminars will be promoted within the financial sector to expand the currently initial level of climate risk awareness in the domestic financial sector. Additionally, each financial sector will promote the discovery and dissemination of best practices for climate risk response to induce the rapid establishment of a climate risk response system.

It will also be possible to discuss in advance with financial companies the main contents and practical applicability of the forthcoming "Climate Risk Management and Supervision Plan," maximizing the effectiveness of this plan. Furthermore, the forum can actively represent the realities of the domestic financial sector in international organization discussions on climate risk response.

A financial sector official said, "The increase in financial risks related to climate change can transfer to risks across the entire financial system through deterioration of financial company soundness and increased uncertainty in financial markets. This forum is very significant in that it is the first time the entire financial sector has created a comprehensive discussion platform for climate risk response."