The Worth of Nature: Unpacking Climate Risk Integration and the Boundaries of Credit Risk Models

Sammanfattning

Amid the accelerating climate crisis and transition towards a low-carbon economy, financial institutions are under growing pressure to identify, measure, and manage climate risks. While risk management is a well-established area both within research and in practice, there remains an empirical gap in understanding how banks integrate climate risk into existing risk management practices. This thesis examines how a large Nordic bank integrates climate risk into their credit risk class assessment. Drawing on Boltanski and Thévenot's 'Orders of Worth' framework, together with insights from commensuration and quantification literature, we find that the integration of climate risk is shaped by the orders of worth dominating the credit risk process. We argue that established risk models and credit professionals serve as 'qualified objects' and 'dominant actors' that define what risks are considered relevant and legitimate. While certain aspects of climate risks are "naturally integrated" into existing quantitative models, other aspects are separated into a distinct, qualitative analysis. This separation reveals both a quantification tension and a temporal tension: climate risks that are qualitative and long-term are often excluded from final risk class decisions due to their incompatibility with existing tools and timeframes. By highlighting these dynamics, this thesis unpacks the underlying values that shape how a financial institution manages risks, especially in the context of a new, emerging risk.