Wall Street's biggest banks are lagging in their response to climate risks

Wall Street’s climate blind spot: Some of Wall Street’s biggest banks might be miscalculating a crucial risk metric — how they’ll navigate a world shaped by rising temperatures and extreme weather, Bloomberg reports. A new study from Climate X, a risk data provider, suggests that while banks, such as Goldman Sachs, Morgan Stanley, and JPMorgan Chase, are beginning to track climate-related risks, they are not making the necessary shifts to address future disruptions caused by extreme weather and rising global temperatures.

Deja vu? Kamil Kluza, chief product officer at Climate X, drew a parallel to the 2008 financial crisis, when banks overlooked liquidity risks. He believes a similar gap exists today with climate risk.

How banks fared: Standard Chartered and Banco Santander emerged as the top performers in financing climate adaptation, scoring around 11-12 points out of 17, while US banks Goldman Sachs, Morgan Stanley, and JPMorgan Chase rank among the lowest for investments that support climate adaptation.

Adaptation efforts fall short…: Climate X found that while 80% of banks are collecting climate-related data, less than half are actively engaging with clients to adjust their financing for climate-vulnerable businesses.

… creating a funding gap: The private sector’s contribution to climate adaptation finance is still alarmingly low. From 2019 to 2022, it accounted for just 3% of the total funding, with most of the burden falling on governments and philanthropies. The current allocation of funds represents only a “fraction of what’s needed,” according to World Bank Senior Managing Director Axel van Trotsenburg, who criticized that much of it is being used to “rectify mistakes that should not have been made.”

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• Microsoft boosts dividend, launches USD 60 bn buyback program: Microsoft raised its quarterly dividend 10% to 83 cents per share and introduced a new USD 60 bn stock-buyback plan, matching a similar program from three years ago. Shares rose up to 2.4% following the announcement. (Bloomberg)
• Forty commercial banks have joined in on the new G7-dominated digital currency platform Agora, considered a rival for the multi-central bank digital currency platform being developed by the UAE, China, Hong Kong, Thailand, and Saudi Arabia, mbridge. (Reuters)

MARKETS THIS MORNING-

Once again, Asian markets are mixed as traders continue to brace themselves for a decisive day for global markets, with the Fed expected to make its first rate cut in five years. While South Korea and Hong Kong markets remain closed for national holidays, Japan’s Nikkei rose 1.22%, and Topix was up 0.9%. Meanwhile, Wall Street futures are flat heading into the big day, with the Nasdaq and Dow Jones only marginally up.

THE CLOSING BELL-

The DFM stayed flat yesterday on turnover of AED 265.5 mn. The index is up 8.3% YTD.

In the green: Dubai National Ins. & Reins. (+10%), Spinneys (+6.1%) and Al Salam Bank (+2.4%).

In the red: Drake & Scull International (-2.3%), Union Properties (-1.7%) and Agility (-1.7%).

Over on the ADX, the index rose 0.4% on turnover of AED 1.3 bn. Meanwhile Nasdaq Dubai closed up 0.6%.