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Climate change may cost financial firms $32B by 2100: BOK

Published: 18 Mar. 2025, 16:20

Korean banks and other financial institutions may lose nearly 46 trillion won ($31.83 billion) by around 2100 if the country fails to properly address climate change, the central bank said Tuesday.

The Bank of Korea (BOK) issued the forecast in a report based on the results of a climate stress test conducted in cooperation with the Financial Supervisory Service (FSS), the Korea Meteorological Administration and major financial firms.

Under a scenario in which the government takes no action to address climate challenges, seven major local lenders and seven major insurance firms would face combined losses of 45.7 trillion won by 2100.

If the government belatedly pushes for net-zero policies after 2030, their losses would amount to around 40 trillion won.

The losses would be approximately 27 trillion won if the government achieves its zero-emission goals by 2050 or reduces carbon emissions by half by that time, the test showed.

"Climate-related issues are expected to become a key risk factor down the road, which could undermine the financial soundness and stability of banks and insurance companies," the BOK said in the report.

"It is essential to revise risk management guidelines, strengthen measures against unexpected losses and promote green investment," it added.

"Appropriate responses to climate challenges would help promote eco-friendly technologies and mitigate relevant risks, which will help financial institutions better manage losses in the long run," BOK Gov. Rhee Chang-yong said in his speech at a conference on climate finances held in Seoul on Tuesday.

FSS chief Lee Bok-hyun also addressed the forum, vowing to activate financing for the low-carbon transition, extend support for smaller firms' efforts to reduce carbon emissions and encourage financial companies to develop climate risk management systems.

Korea has pledged to reduce its greenhouse gas emissions by 40 percent from 2018 levels by 2030 and achieve carbon neutrality by 2050.

Yonhap

Yonhap