The Repo Market Has Started Pricing In Energy Transition Risks

For years, climate experts have insisted that markets will naturally push companies to take climate change more seriously as risks become more apparent. Fresh research indicates that borrowers are now starting to face a financial penalty for ignoring the dangers ahead.

This month, a paper published by the European Central Bank found that banks with the greatest so-called transition risks now “face significantly higher borrowing costs” in funding markets. That followed a December paper by analysts at the Central Bank of Ireland, which showed that companies facing physical climate risks are in a similar predicament, and will need to provide more collateral.