The Quiet Revolution in Business Credit Allocation for Companies Exposed to Climate Risks

The past decade has marked a turning point in recognizing the financial implications of the climate crisis. As climate-related risks increasingly affect global markets, regulators worldwide are integrating environmental and climate considerations into the financial system. The Basel Committee on Banking Supervision (BCBS) set this trend in motion with its 2022 principles on climate-related financial risks. In Israel, this movement is culminating in the forthcoming Proper Conduct of Banking Business Directive No. 345, which will take effect in June 2026, requiring banks to systematically identify, assess, and manage climate-related risks within their credit portfolios.

Directive 345 introduces a paradigm shift: banks must now consider environmental exposure as a core financial risk factor, on par with credit or liquidity risks. Institutions will evaluate their corporate clients through new climate questionnaires, scenario analyses, and advanced statistical models that quantify vulnerabilities to physical, regulatory, and transitional climate risks. Companies that fail to provide adequate climate data or demonstrate sound sustainability practices may face stricter lending terms, higher collateral requirements, or even credit denial, while firms with proactive sustainability strategies will benefit from better financing conditions and stronger investor trust.

For the business sector, the directive signifies a fundamental transformation in credit access. Climate readiness will become a decisive factor for financing and competitiveness. Firms across high-risk industries—such as agriculture, real estate, energy-intensive manufacturing, and logistics—must now adopt structured climate-risk management processes, reduce emissions, and enhance transparency through standardized ESG reporting. Early adaptation will not only ensure regulatory compliance but also create a strategic advantage in a rapidly evolving global economy where climate resilience and environmental governance define long-term financial stability.

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