In other words, sectors of the real economy that rely heavily on external finance (that is, do not fund capital expenditures through cash flow) tend to experience a substantially slower growth of value added during a banking crisis than those sectors that do not rely so heavily on external funding. This effect is more pronounced in countries with more developed financial systems.
The more we delay effective climate policies, however, the quicker and the more powerful the policies will need to be in the future. Every financial institution needs to assess these climate-based risks and incorporate them into their risk management frameworks. A related question is how financial supervisors and regulators should approach climate-based financial risks.