<![CDATA[The transformation toward a green economy has driven fundamental changes in the global financial sector's risk landscape. In Indonesia, the development of the Indonesia Carbon Exchange (IDX Carbon), the implementation of sustainable finance, and the 2060 Net Zero Emission commitment present both challenges and opportunities for the banking industry. However, the risk management approaches employed by most banks remain oriented toward traditional financial risks and have not yet fully integrated sustainability risks stemming from climate change, Environmental, Social, and Governance (ESG) factors, and carbon market dynamics. This article aims to develop a conceptual model for sustainable banking risk management that integrates external and internal factors within a more comprehensive framework. The study employs a literature review method with a conceptual approach, integrating the PESTEL framework, Enterprise Risk Management (ERM), the ESG framework, climate risk, and carbon market risk. The findings indicate that external factors—such as policy changes, technological advancements, market demands, and carbon regulations—generate climate and carbon risks that impact banks' ESG risk exposure. A TOWS analysis highlights the need to transform risk management systems into models that integrate ESG governance, climate risk analytics, scenario-based assessments, and strategic portfolio transitions. This article proposes a new conceptual model illustrating the relationships among PESTEL drivers, climate and carbon risk drivers, ESG risk exposure, ERM responses, and sustainable banking performance. The model is intended to serve as a strategic framework for Indonesian banks to enhance resilience against sustainability risks while supporting the transition to a low-carbon economy.]]>
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