FSA Releases Comprehensive Analysis of Climate-Related Risks in the Banking Sector
Tokyo, Japan – August 29, 2025 – The Financial Services Agency (FSA) of Japan is pleased to announce the publication of its latest report, “FSA Analytical Notes (2025.7): A Quantitative and Textual Analysis of Climate-Related Risks in the Banking Sector.” This detailed report, now available in Japanese, provides a thorough examination of the multifaceted climate-related risks facing the Japanese banking industry.
The release of this analytical note underscores the FSA’s ongoing commitment to promoting financial stability and supporting the sustainable development of the financial sector. Recognizing the increasing significance of climate change as a systemic risk, the FSA has undertaken this in-depth study to offer valuable insights for financial institutions, regulators, and other stakeholders.
“FSA Analytical Notes (2025.7)” employs a dual approach, integrating both quantitative and textual analysis to paint a comprehensive picture of climate-related risks. The quantitative component delves into the measurable impacts of climate change on banks’ balance sheets, including potential credit risks arising from physical and transition impacts. This aspect of the analysis aims to provide concrete data and metrics that can inform risk management strategies and capital allocation decisions.
Complementing the quantitative findings, the textual analysis offers a qualitative understanding of how climate-related risks are being perceived, discussed, and managed within the banking sector. This includes an examination of disclosures, strategic communications, and internal policies, providing insights into the evolving landscape of climate risk governance and integration into business models.
Key areas explored in the report are expected to include:
- Physical Risks: The potential for financial losses due to extreme weather events and long-term climate shifts impacting borrowers’ ability to repay loans and the value of collateral.
- Transition Risks: The financial implications arising from the shift towards a lower-carbon economy, including policy changes, technological advancements, and evolving market preferences that could affect the profitability and viability of carbon-intensive sectors.
- Climate Risk Management Frameworks: An assessment of the current practices and frameworks employed by Japanese banks to identify, measure, manage, and disclose climate-related risks.
- Industry-wide Trends and Vulnerabilities: An identification of common challenges and vulnerabilities across the banking sector in addressing climate-related risks.
The FSA anticipates that this report will serve as a valuable resource for financial institutions as they continue to enhance their understanding and management of climate-related risks. By providing a rigorous analytical foundation, the FSA aims to empower banks to proactively adapt their business strategies and risk management practices, thereby strengthening the resilience of the financial system in the face of a changing climate.
The publication of “FSA Analytical Notes (2025.7)” reflects the FSA’s dedication to fostering transparency and collaboration in addressing the critical issue of climate change and its impact on the financial sector. The report is now accessible on the FSA’s official website, inviting stakeholders to engage with its findings and contribute to the ongoing dialogue on sustainable finance.
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金融庁 published ‘Publication,Publication of “FSA Analytical Notes (2025.7): A Quantitative and Textual Analysis of Climate‑Related Risks in the Banking Sector” in Japanese’ at 2025-08-29 17:00. Please write a detailed article about this news in a polite tone with relevant information. Please reply in English with the article only.