IFC Launches ClimaLab in Europe to Help Financial Institutions with Climate Risk Management Tools

Climate-related disasters in Europe have resulted in approximately €650 billion in losses, averaging around €15.5 billion annually from 1980 to 2022.

The International Finance Corporation (IFC) is launching ClimaLab, a pioneering initiative aimed at helping financial institutions across Europe manage climate-related risks effectively. This innovative program, developed in partnership with the government of the Netherlands, is designed to equip banks and financial entities with the knowledge, tools, and skills needed to navigate and mitigate the financial impacts of climate change.

Climate-related disasters in Europe have resulted in approximately €650 billion in losses, averaging around €15.5 billion annually from 1980 to 2022. Financial institutions have also suffered significant impacts, with research indicating that non-performing loan ratios can rise by 0.37 percentage points following severe climate and environmental disasters. As the projected effects of climate change intensify, there is an urgent need for enhanced resilience and proactive risk management in the financial sector. The European Union's regulatory framework is increasingly pushing banks to incorporate climate risk into their decision-making processes and focus on managing these risks within their loan portfolios while financing sustainable initiatives.

ClimaLab represents the first initiative of its kind by a multilateral development institution, featuring a suite of climate-focused programs tailored to the diverse needs of financial institutions across various regions. The initiative aims to bolster banks' capacities in climate resilience, facilitate the integration of climate and sustainability measures into their management practices, and help them explore sustainable investment opportunities.

“Climate change presents a significant financial risk to economies, and financial institutions are pivotal in mitigating this risk,” said Liliana Pozzo, IFC Sustainable Finance Advisory Services Manager for Latin America and the Caribbean and Europe. “ClimaLab is designed to empower banks and other financial entities to navigate the complexities of climate risk and leverage the opportunities arising from the transition to a low-carbon economy.”

Currently, IFC is piloting ClimaLab with select banks in the region to fine-tune its curriculum and materials for maximum effectiveness. Financial institutions interested in joining future ClimaLab cohorts can apply via climalab@ifc.org.

The official launch of ClimaLab in Europe is set for November and will focus on climate risk management and the goals of the Paris Agreement. Developed by IFC in collaboration with Management Solutions, an international business consulting firm, the program will assist financial institutions in assessing climate-related risks, integrating these risks into mandatory disclosures and sustainability reports, and developing transition and adaptation strategies that align with regulatory expectations.