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
FDIC Proposes Amendments to Real Estate Lending Standards
FDIC is seeking comments on a rule to amend the interagency guidelines for real estate lending policies—also known as the Real Estate Lending Standards.
MAS Amends Notices on Risk-Based Capital Adequacy Requirements
MAS revised Notices 637 and 1111 on the risk-based capital adequacy requirements, along with Notice 656 on the exposures to single counterparty groups for banks incorporated in Singapore.
ISDA Consults on Implementation of Fallbacks for Certain Swap Rates
ISDA is consulting on the implementation of fallbacks for the sterling LIBOR ICE Swap Rate and for the USD LIBOR ICE Swap Rate.
US Agencies Set Out Unified Agenda for Planned Regulatory Actions
SEC announced that the Office of Information and Regulatory Affairs released the Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions.
BIS and BoE Launch Innovation Hub in London
BIS and BoE launched the BIS Innovation Hub Center in London, which is the fourth new Innovation Hub Centre to be opened in the past two years.
ESRB Recommends Reciprocation of Certain Macroprudential Measures
ESRB published recommendations on the reciprocation of macro-prudential measures in Belgium, France, Luxembourg, Norway, and Sweden.
MAS Amends Regulatory Notices Applicable to Banks in Singapore
MAS revised multiple notices that are applicable to banks and merchant banks in Singapore and have been issued pursuant to the Banking Act (Cap 19).
EC Publishes Regulation on Key Aspects of Implementation of SA-CCR
EC published the Delegated Regulation 2021/931, which supplements the Capital Requirements Regulation (CRR or Regulation 575/2013) with regard to the regulatory technical standards specifying the method for identifying derivative transactions with one or more than one material risk driver.
BCBS Consults on Prudential Treatment of Cryptoasset Exposures
BCBS is consulting on preliminary proposals for the prudential treatment of cryptoasset exposures of banks.
EBA Revises List of Validation Rules for Reporting
EBA issued a revised list of validation rules under the implementing technical standards on supervisory reporting.
