Climate risk analysis typically entails the development of scenario-based stress tests for assessing bank solvency and liquidity, using bank level data.
60% of banks don’t have a climate risk stress testing framework; only 20% consider climate risk when granting loans.
Principles for banks and financial supervisors aim to strike balance between improving practices and providing common baseline.
Without early action, the UK’s largest banks and insurers would suffer climate-related losses worth US$418 billion by 2050.
Greater scope and depth needed to keep pace with demand for more holistic approaches to climate risk management by banks and investors.
Proposed framework identified four elements of climate risk that may adversely impact clearing houses and intermediaries.
Defaults in thermal power, steel and cement sectors may increase if companies in those sectors do not shift to low-carbon alternatives.
Guidance to be issued on climate risk management, scenario analysis and TCFD-aligned disclosures.
Reflections on the successes and failures of COP26 must motivate the public and private sectors.
Paris-alignment scores are useful indicators of net-zero progress, but data shortages raise questions around accuracy.
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