Ghana’s banks are at a crossroads. Climate risk is no longer a distant threat, but a pressing reality that’s already impacting balance sheets. As the world looks beyond COP30, Ghana’s financial institutions must shift from reactive compliance to predictive resilience, and climate stress testing is the key to making this possible.
By leveraging scenario analyses aligned with NGFS pathways and Africa-specific climate models, banks can quantify the potential impacts of climate-related events on creditworthiness, collateral values, and sectoral exposures over the next decade. This proactive approach enables banks to anticipate and prepare for risks, rather than simply reacting to them.
Climate stress testing allows banks to identify areas of vulnerability and opportunities for growth, enabling them to redesign portfolios, refine loan covenants, strengthen sector due-diligence frameworks, and unlock concessional financing for climate-resilient projects.
For instance, banks can assess the potential risks associated with lending to industries that are more likely to be affected by climate change, such as agriculture or construction.
Moreover, climate stress testing can help banks capitalize on emerging opportunities in the green economy. By identifying sectors and businesses that are poised to thrive in a low-carbon future, banks can position themselves to support Ghana’s transition to a more sustainable and resilient economy.
Ghana’s banks have a unique opportunity to position themselves at the forefront of climate-resilient finance. By embracing climate stress testing, they can ensure a sustainable and prosperous future for themselves and the country.
As the financial landscape continues to evolve, banks that have invested in climate stress testing will be well-placed to navigate the challenges and opportunities that lie ahead.
The institutions that master climate scenario analysis today will dominate tomorrow’s adaptation economy. Climate risk is a balance-sheet event already unfolding, and Ghana’s banks must act now to future-proof their finances. By doing so, they can not only mitigate risks but also unlock new opportunities for growth and development.
By: Justice Akoto,Sustainable Operations Advisor-Fidelity Bank
Source: www.climatewatchonline.com
