The Financial Stability Institute (FSI) of BIS issued a summary of the meeting held in Basel from February 20-21, 2020. The participants, which included 97 representatives of central banks, financial supervisory authorities, banks, insurers, academia, and climate risk modelers from 69 jurisdictions, agreed that climate change now poses a credible threat to financial stability. One of key conclusions of the meeting was that firms and financial authorities need to improve their ability to assess the financial risks posed by climate change. At present, such capabilities vary considerably across jurisdictions and financial sectors. Financial institutions and supervisory authorities need to consider how severely a range of future climate possibilities could shock the balance sheets of financial institutions.
At the meeting, several participants delivered keynote speeches, including the Deputy General Manager of BIS (Luiz Awazu Pereira da Silva), the Executive Board Member of APRA and the Chair of the Sustainable Insurance Forum (Geoff Summerhayes), and Co-Chair of the Advisory Committee of Future Earth (Leena Srivastava). Representatives of the standard-setting bodies and international climate forums explained how their work plans will contribute to the global efforts to mitigate the risk that climate change could pose toward a future financial crises. For its part, FSI will continue to support efforts to build capacity and enhance understanding of climate risks within the global supervisory community.
The six panel sessions of the meeting focused on climate risk assessment. The discussions covered both strategic issues, such as the sequencing of regulatory and supervisory measures, and technical discussions, such as climate risk modeling. Supervisory authorities shared their expertise on the stress testing of climate risks and how to conduct such exercises effectively. Authors of the recent FSI Insights paper on climate risk assessment in the insurance sector highlighted the key findings of a study, which drew on a survey of 18 insurance authorities. There was also an exchange of views on how existing risk management requirements for banks and insurers could be adjusted to capture their climate risk exposures.
Related Link: Meeting Summary
Keywords: International, Banking, Insurance, Securities, Climate Change Risk, ESG, Sustainable Finance, FSI, BIS
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