Adaptation to ClimateChange : Climate Scenario Analysis in the Swedish Banking Sector

Abstract: Climate change presents financial risks for banks and must therefore be treated accordingly. To assess and manage these risks, banks are expected to apply scenarioanalysis and adopt the TCFD’s recommendations on climate-related risk disclosures. This study analyzes how climate scenario analysis is implemented and reported in the Swedish banking sector. Empirical data has been collected through interviews with six banks, as well as through public annual and sustainability reports. The results of the study indicate that banks are in a learning phase characterized by uncertainty and lack of data, resulting in careful considerations in making strategic decisions based on the scenario analysis and when disclosing climate related information. Thus, banks do not disclose their scenario analysis as transparently as the TCFD suggests, thereby affecting the comparability within the sector. Further improvements related to more accessible and granular data are needed. In addition, many banks consider this to be a governmental issue where regulations are beneficial for establishing standardized models and common practices, which in turn could increase transparency and comparability.