In a significant development for Morocco's financial sector, the Bank Al-Maghrib (BAM) and the European Bank for Reconstruction and Development (EBRD) have concluded a program aimed at bolstering the resilience of Moroccan banks in the face of escalating climate-related challenges. This initiative, launched in 2022, addresses the mounting pressures stemming from droughts and variability, which have been severely impacting key sectors such as agriculture and energy, both heavily reliant on bank financing.
The urgency of the situation was underscored by Bouazza Abderrahim, the Director General of Bank Al-Maghrib, who highlighted the rapidly evolving global landscape marked by climate disruption, geopolitical tensions, and regulatory volatility. He emphasized the responsibility of financial authorities and institutions to effectively manage risks, including those associated with climate change.
The program, supported by the Frankfurt School of Finance & Management and RINA Consulting, equipped Moroccan banks with essential technical and strategic tools to enhance their ability to identify, assess, and mitigate climate-related risks. Abderrahim noted that the capacity-building program covered various modules on climate risk management and climate transition, underscoring the growing recognition of climate risk management as both a prudential and economic concern by banks.
The absence of a methodological framework, Abderrahim warned, could expose banks to significant losses on assets sensitive to climate risks. In response, BAM has introduced a regulatory framework mandating banks to progressively integrate climate risks into their governance and risk management processes. This framework is expected to be strengthened and adapted based on the experience gained and evolving climate practices.
This initiative is a pivotal component of Morocco's broader strategy to develop climate finance by 2030, which aims to foster coordination between regulators, financial institutions, and public authorities. According to Abderrahim, the national strategy provides an appropriate framework for dialogue and encourages the economic fabric to engage in decarbonized projects.
The recent natural disasters in Morocco, including floods in northern provinces, consecutive years of drought, and the 2023 Al Haouz earthquake, have further underscored the physical risks that necessitate the integration of more entities like banks. These events serve as a stark reminder of the importance of proactive climate risk management in the financial sector, and the need for continued collaboration between regulatory bodies, financial institutions, and public authorities to navigate the complexities of a rapidly changing climate.
