NAFIN Fellowship Working Paper

Assessing and Managing Climate Risk Exposure

How can NAFIN incorporate into its structure and decision-making processes the governance mechanisms proposed by the Task Force on Climate-related Financial Disclosures (TCFD) to attract international investors concerned about climate change issues?

The involvement
of Mexican authorities will encourage companies and financial entities to commit to the national and international climate goals

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The third working paper in the series by NAFIN Fellow Marisol Rentería Bravo, Assessing and Managing Climate Risk Exposure, looks at how NAFIN can incorporate into its structure and decision-making processes the governance mechanisms proposed by the Task Force on Climate-related Financial Disclosures (TCFD) to attract international investors concerned about climate change issues.

With NAFIN investing almost 20% of its loan portfolio in high carbon-intensive sectors exposed to climate risks, the paper details the importance of starting to act now as more stringent targets on global temperature are implemented over time, and the growth in severity and risk of climate change increases.

The paper concludes that NAFIN can play a key role in facilitating the analysis of the materiality of climate risks, pushing Mexican authorities, such as the Central Bank, Banking Regulatory Authority and the Ministry of Finance, to develop mandatory disclosure policies aimed to increase the information available to investors. Likewise, the involvement of Mexican authorities will encourage companies and financial entities to commit to the national and international climate goals, for example, the target of Mexico to reduce GHG emissions of 30% by 2020 and 50% by 2050 compared to 2000 base year levels (GLCC), and the goal of limiting global warming to well below 2°C and to pursue efforts to limit the increase to 1.5°C, according to the Paris Agreement.

Access the NAFIN Working Paper series here.