How should climate risk be integrated in the risk taxonomy and should be linked to regulatory capital and supervision of banks?

Climate change is putting the world at risk: its impacts can be serious, even irreversible! Actions must be taken before it is too late. The Paris agreement therefore set the target of keeping global warming to between 1,5°C and 2°C above pre-industrial levels. Today, all sectors must take climate into account, including the banking sector. Banks must include climate risk in their risk management framework. However, they face challenges and there are several gaps in the management of this new risk. Banks still need to improve their climate risk management. For this purpose, the authorities are currently considering new regulations. This thesis focuses on climate risk and its potential impacts on the banking sector. It discusses how it should be integrated in the risk taxonomy and linked to regulatory capital and supervision of banks. After having analyzed the ways considered by experts to integrate it into the regulatory framework and more specifically into the three pillars of Basel Accords, this thesis analyzes how some banks have already integrated climate risk into their risk management framework.