Principle 8: Banks should understand the impact of climate-related risk drivers on their credit risk profiles and ensure that credit risk management systems and processes consider material climate-related financial risks. [Reference principles: BCP 17, BCP 19, SRP 20, Principles for the management of credit risk]

35. Banks should have clearly articulated credit policies and processes to address material climate-related credit risks. This includes prudent policies and processes to identify, measure, evaluate, monitor, report and control or mitigate the impacts of material climate-related risk drivers on their credit risk exposures (including counterparty credit risk) on a timely basis. Banks should incorporate consideration of material climate-related financial risks into the entire credit life cycle, including client due diligence as part of the onboarding process and ongoing monitoring of clients' risk profiles.

36. Banks should also identify, measure, evaluate, monitor, report and manage the concentrations within and between risk types associated with climate-related financial risks. For example, banks could use metrics or heatmaps to assess and monitor concentration of exposure to geographies and sectors with higher climate-related risk.