CLIMATE FINANCE: THE IMPACT OF CLIMATE CHANGE TO BEHAVIORAL FINANCE

The ongoing climate transformation provides novel opportunities, along with associated risks, for the banking and behavioral finance sector: the elements contributing to climate change can have an impact on this system, leading to potential exposure to various forms of climate risk. Describing through a "macroprudential" perspective, the current paper considers that it is crucial to consider how regulatory bodies have recently advocated for the development of standardized models to evaluate vulnerability to climate risk and enhance the analysis of climate-related scenarios especially in countries with significant climate change impact as the Western Balkans. By opting for soft law mechanisms and leaning towards a risk-centric approach, it becomes feasible to adjust regulations to the dynamic and unpredictable nature of the subject matter, while also ensuring a swift and precautionary response to potential systemic crises arising from inadequate incorporation of climate risks. However, on a micro-management level, bank staff bear the responsibility of integrating climate and environmental factors into the risk management function when assessing exposure to diverse risks and during monitoring activities. Consequently, the system is witnessing the emergence of new dimensions of accountability, particularly towards external entities who may hold non-monetary interests associated with environmental conservation. It is imperative therefore that the entirety of the economic rights and freedoms of the European Union Regulatory Acts must now align with the imperative of environmental preservation, biodiversity, ecosystems, and sustainable development.