Magazine

The Climate Consideration for Every Balance Sheet Decision

Climate risk is no longer a sustainability issue sitting alongside mainstream finance. Libor Krkoska argues that it should be treated as a core financial risk and embedded directly into balance sheet planning, influencing capital adequacy, liquidity, credit quality, collateral valuation and long-term funding strategy. The article explores how both physical and transition risks can affect borrower performance, asset values and portfolio concentrations, while highlighting the importance of stronger data, disclosure and climate-related risk assessment.