Banks and asset managers in the world's richest economies face a $22 trillion exposure to carbon-intensive sectors such as manufacturing and oil and gas, the Economic Times reported, citing a study by Moody's Investor Services.
At the same time, the transition away from carbon is creating "vast" investment opportunities for the financial institutions in the G-20 nations, the story said.
Asia and the Americas led the list of the regions with the most exposure, the Times reported. The report did not break down the potential exposure by individual countries, it said.
Banks risk damage to their franchise and credit profiles from exposure to polluting industries, new regulations to control climate change and stakeholder pressure, according to the report, The Times said.
Climate change also poses risk for insurance companies as the weather becomes unpredictable, the story said. Volatility of profits and lost premiums are also risks insurance companies will face. Some of the risks grow so severe that they can no longer be insured, The Times said. Climate-change litigation is also a potential threat to financial institutions.
Banks hold 60% of the exposure to carbon sectors, with 30% held by asset managers, the report said, according to the Times.
However, as sectors transition to low-carbon industries, it will require "huge" investments, creating massive lending opportunities for banks, the story said.
Asset managers can benefit as well by investing in companies that offer solutions that contribute to a low carbon economy, The Star in Malaysia reported.