NGFS Publishes Overview of Climate-Related Impact Assessments
The Network for Greening the Financial System (NGFS) published a technical supplement to its April 2019 comprehensive report on the implications of climate change on macroeconomic and financial stability. The supplement provides an overview of the existing approaches for quantitatively assessing climate-related risks and identifies key areas for further research. It also sets out a menu of options for central banks and supervisors to assess the risks.
It is important for central banks and supervisors to more clearly identify the climate-related risks, as both physical and transition risks impact macroeconomic variables and may generate the potential for financial instability. As a consequence, NGFS started this work to better understand climate-related risks and develop tools to identify and address the buildup of risk, potentially including climate-related economic forecasting, development of macroeconomic scenarios, scenario-based stress testing, key risk indicators, and financial exposure analysis. Going forward, NGFS plans to publish additional technical documents to better equip central banks and supervisors with appropriate tools and methodologies to identify, quantify, and mitigate climate risks in the financial system. This will include publishing further details on the NGFS transition scenarios and the guidelines on scenario-based climate risk analysis.
Since April 2019, NGFS has welcomed six new members including Abu Dhabi Financial Services Regulatory Authority, CBM, CCSF, Dubai FSA, HKMA, and SARB. Furthermore, BCBS and IAIS have joined NGFS as observers. Since its launch in December 2017, the NGFS membership has quickly expanded from the eight original members to 42 members and 8 observers. NGFS has also engaged with two research networks—Global Research Alliance for Sustainable Finance and Investment (GRASFI) and International Network for Sustainable Financial Policy Insights, Research, and Exchange (INSPIRE).
Related Links
Keywords: Europe, Banking, Insurance, Securities, Financial Stability, Stress Testing, Impact Assessment, Climate Change Risks, NGFS, DNB
Featured Experts

Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.

Amnon Levy
Financial researcher; authority in credit portfolio management and AI/ML, risk-based pricing, climate and credit, CECL/IFRS 9; credit and ALM

Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
Related Articles
FED Proposes to Extend Data Collection Under Stress Testing Guidance
FED proposed three-year extension, without revision, of the information collection FR 4202, titled "Recordkeeping Provisions Associated with Stress Testing Guidance."
FCA Proposes Updates to Guidance on Mortgage Repossessions
FCA updated the draft guidance for firms to ensure that mortgage customers whose homes may be repossessed are treated fairly and appropriately, particularly where there are risks of harm to customers who are vulnerable as a result of the COVID-19 pandemic.
FCA Announces Cessation Timeline for Certain LIBOR Benchmark Settings
FCA issued a statement on the cessation or loss of representativeness of the 35 LIBOR benchmark settings published by ICE Benchmark Administration or IBA.
EBA Publishes Reporting and Disclosures Framework for Investment Firms
EBA published a package that includes the final draft implementing technical standards on supervisory reporting and disclosures of investment firms.
BIS Examines Use of Big Data and Machine Learning at Central Banks
BIS published a paper that provides an overview on the use of big data and machine learning in the central bank community.
APRA Finalizes Reporting Standard for Operational Risk Requirements
APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.
ECB Publishes Guide for Determining Penalties for Regulatory Breaches
ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.
MAS Sets Out Good Practices to Manage Operational Risks Amid COVID
MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.
ACPR Announces New Data Collection Application for Banks and Insurers
ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.
BCB Maintains CCyB at 0%, Initiates First Cycle of Regulatory Sandbox
BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.