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).
Keywords: Europe, Banking, Insurance, Securities, Financial Stability, Stress Testing, Impact Assessment, Climate Change Risks, NGFS, DNB
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