On December 7, 2021, Shenzhen Water Conservation Office issued a water conservation initiative to all citizens, saying that the water supply security situation this winter and next spring is not optimistic, and it is urgent for the whole people to save water. Since the autumn of 2019, due to the continuous lack of rain, the water level of major rivers in Guangdong Province has been significantly lower than that in the same period of previous years, and many parts of the province are facing the challenge of drought. According to the official introduction, under the same degree of drought, the consequences of the disaster in 1963 are far less serious than now. With the increase of population and rapid economic development, the water demand in the Great Bay area of Guangdong, Hong Kong and Macao has increased sharply. Some experts said that the drought is related to global warming, climate system instability and water cycle, indicating that the impact of climate risk on economy and people’s livelihood is increasing. The main concerns are as follows:
First, the consequences of climate risk are more complex. In the context of global climate change, many parts of China are facing the impact of more frequent extreme weather and climate events, which have adverse effects on water resources, ecosystem, human settlements, urban and rural areas to varying degrees. Over the past 20 years, China’s climate risk has been at a high risk among nearly 200 countries and regions in the world, ranking among the top 30 in the world for many years. On July 17, 2021, continuous heavy rainfall broke out in Zhengzhou and other places in Henan Province, resulting in floods and secondary disasters caused by rainstorm, which affected 11.44 million people in Henan Province. In addition to drought and flood, ultra-high temperature, rainstorm, typhoon, power shortage and rising vegetable prices have occurred. Abnormal climate frequently occurs in real life, and the climate risk is far from just the problem of green environmental protection and carbon neutralization. In the “proposal of the CPC Central Committee on formulating the 14th five year plan for national economic and social development and the long-term goals for 2005”, it is also specifically proposed that China will build a higher level of safe China, run security development through all fields and the whole process of development, prevent and understand various risks affecting China’s modernization process, and build a solid national security barrier. Climate risk prevention and control is imminent.
Second, climate risk has become the most unstable factor in the global economy. According to the 2021 global institutional investor survey released by Mingsheng index, nearly one third of the institutional investors with assets of more than US $200 billion said that the climate risk in the next three to five years was the biggest factor affecting the way of institutional investment. Governments all over the world have been aware of the adverse consequences of climate risk. Extreme climate change has a profound impact on the sustainable development of global economy and society, poses a serious threat to food security, ecological security, land security and water resources security of all countries, and has a negative impact on economic growth. First, natural disasters caused by climate will lead to direct economic losses and impact the real economy. For example, the cold wave in Texas in February this year led to the bankruptcy of brasos power cooperation, the largest power company in Texas, with economic losses as high as $195 billion. Second, the frequency and amount of claims faced by insurance companies due to frequent natural disasters far exceed expectations. According to statistics, in the first half of 2021, extreme weather caused global insurance companies to lose $40 billion, the second largest loss in the same period since records began. Third, in order to achieve the goal of carbon neutrality, all countries have to pay high costs and fiscal expenditure in the early stage, which will restrict the speed of economic growth in the short term. In addition, carbon neutralization promotes the transformation of fossil energy industry. Higher carbon emission standards and environmental protection requirements will increase the operating costs of relevant enterprises, such as replacing equipment, switching to clean energy, taxing carbon emissions, etc., which will also lead to the decline of profits, debt paying ability and default risk of relevant enterprises. Although in the context of carbon neutrality, the changes of industrial structure, energy structure and lifestyle have a long-term and far-reaching impact on the economic structure of various countries, the ability of various countries to cope with climate change will also become a key factor in the change of international power balance in the future.
Third, banks should be more proactive in climate risk prevention and control. Financial institutions represented by banks cannot be immune from the trend of climate change, and their business operations are inevitably impacted. For example, when climate change causes collateral damage or devaluation in affected areas and enterprises lose their solvency, the quality of bank loans will decline, and the probability of loan default and default loss will rise. In view of this, banks need to take precautions and be fully prepared to prevent and control climate risks. First, improve the climate risk management mechanism, strengthen the staff training and team building of climate risk, integrate climate risk into the comprehensive risk management system, consider the correlation and transmission path between climate risk and various risks, and use scientific and technological means such as big data, Internet of things and artificial intelligence to realize the whole process management of climate risk identification, measurement, rating, monitoring and control, At the same time, do a good job in the investigation, classification, early warning and stress test of climate risk customers. Second, strengthen the research on macro policies, improve the sensitivity to global climate change and climate policies, actively track and analyze hot events and key data information, study and judge the transformation path of China’s economic structure, energy structure and industrial structure under the background of “double carbon”, prospectively adjust and optimize investment and financing strategies, and put forward valuable significance and suggestions for the government. Third, innovate financial service products and expand support service objects. Implement the national requirements for green credit, promote the transformation of investment and financing structure to green and low-carbon, Including increasing credit support for green assets (clean energy power generation, new energy vehicles, hydrogen energy, energy storage, etc.) (non resource-saving and non environment-friendly industries such as high pollution, high carbon, high energy consumption and high water consumption) we should promote the benign transformation and upgrading or steady exit of the industry and grasp the rhythm. At the same time, banks can also study and support other disaster prevention facilities construction projects, such as sewer pipes and seawater desalination equipment, and strive to deal with and prevent climate risks in an all-round and multi angle.
