ABSTRACT
Environmental risk in the banking sector is currently one of the most discussed risks because of the increasing impact of nonfinancial risk on business, society, and the economy. Environmental risk is incorporated into the decision-making process in financial institutions, and in financial reporting there are disclosure commitments so that every stakeholder has access to information about the “greening” process of financial institutions. The role of banks as financial intermediaries means that the challenges posed by ESG factors, especially climate change for the financial system, require them to take adjustment measures. The category of environmental risk, the mechanisms of its spread, methods of mitigating this risk, and preventive and adaptive actions of banks as a response to environmental risk exposure are the focus of interest as well as the special role of environmental risk modelling. The chapter also presents an overview of the key concepts discussed in this book.
