This article was originally published by Financial News on September 2, 2020.
The energy-market collapse this spring offered a glimpse into the massive risks sitting inside bank loan portfolios. Around the world, bankers watched in shock as oil prices went negative for the first time in history and once-thriving companies suddenly teetered on the brink.
Fortunately for banks and their shareholders, prices soon staged a partial recovery, staving off a wave of defaults for now.
But the episode serves as a wakeup call for another threat that looms on the horizon for the energy sector and, in turn, for banks and investors: climate risk.
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