ESG trends Nigeria has prompted the banking sector to fundamentally restructure how it evaluates and manages climate-related risks. This transformation affects lending decisions, investment portfolios, and operational strategies.
Major Nigerian banks now employ dedicated ESG teams to assess climate risks in their loan portfolios. These teams evaluate potential physical risks from climate change and transition risks from policy changes or technological shifts.
Credit scoring models increasingly incorporate ESG factors. Banks are developing new methodologies to assess how climate change might affect borrowers' ability to repay loans, particularly in agriculture and coastal industries.
Green financing products are expanding rapidly. Banks offer preferential interest rates for renewable energy projects, energy-efficient buildings, and sustainable agriculture initiatives. These products help banks meet ESG targets while supporting economic growth.
Stress testing procedures now include climate scenarios. Banks must demonstrate their portfolios can withstand various climate change impacts, from severe weather events to rapid transitions to low-carbon economies.
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