Classification and risk management tools in eco-credit financing

Abstract

The article aims to explore the peculiarities of managing banking risks in eco-lending under contemporary conditions of heightened uncertainty caused by war, economic instability, and the identification of the impact of climate change on the transformation of financial risks considering climate-related risks. Climate change has become a global phenomenon, creating new challenges for businesses, financial institutions, central banks, and the economy as a whole. Eco-lending risks are systematized and generalized, with distinctions made between general and specific financial risks into which climate risks transform. The high level of uncertainty presents a challenge for integrating climate risks into the risk management systems of financial institutions, which remains particularly complex. Directions for the transformation of risks generated by global climate change into financial risks have been identified. Despite the threatening impact of losses caused by extreme weather events and climate-related disasters, managing these risks is still characterized by a low level of integration into the risk-oriented management systems of financial institutions.

Methods: The theoretical and methodological foundation of the research includes fundamental and applied works by domestic and foreign risk management experts. To address the objectives, general scientific methods (analysis, synthesis, induction, deduction, comparison), optimization problem-solving methods, and others were utilized.

Results: To enable financial businesses to effectively manage risks considering climate changes, innovative approaches with strategic importance have been proposed, including green bonds and catastrophe bonds.

Conclusions: Successful implementation of eco-lending risk management policies by financial institutions will positively impact financial stability and sustainable economic development.