BoM Governor Warns that Climate Change Now Poses Major Financial Risk

The Governor of the Bank of Mauritius (BoM), Dr Priscilla Muthoora-Thakoor, has issued a stark briefing to the financial sector, declaring that climate and sustainability risks are no longer secondary concerns but have evolved into “fully-fledged financial risks.”

Addressing the industry, the Governor emphasised that environmental, social, and governance (ESG) criteria have moved from the periphery of banking to become a structural pillar of the financial system.

She warned that these factors now directly influence the stability of institutions, asset valuations, and the fundamental strength of credit portfolios.

A Shift in Risk Management

The Governor’s message signals a definitive shift for regulators and commercial banks alike.

Rather than being treated as a separate corporate social responsibility programme, sustainable finance is now being framed as an essential component of prudent risk management and long-term value creation.

“Sustainability is now establishing itself as a structural pillar of the financial sector,” Dr Muthoora-Thakoor noted, stressing that proactive measures are now a necessity for maintaining financial integrity.

Global Market Surge

This local directive mirrors a massive acceleration in the global “green” economy. The Governor highlighted significant milestones in international finance, including:

• Green Bonds: Global market capitalisation has now surpassed $2.5 trillion (approx. MUR 115 billion).
• ESG Lending: Loans linked to sustainability criteria are becoming increasingly commonplace.
• Asset Valuation: Increasing scrutiny is being placed on how sustainability impacts collateral quality and credit risk.

Looking Ahead

The Bank of Mauritius expects the impact of sustainability on key financial indicators to intensify.

Banks are being urged to integrate ESG deeply into their core operations, as the quality of guarantees and the assessment of credit risk will increasingly depend on environmental resilience.

Source: Defi Media