David Carlin’s Post

Great diagram showing the transmissions of nature risk to financial risk.

The Basel Committee on Banking Supervision released a discussion paper on the use of climate scenario analysis (CSA) for managing and supervising climate-related financial risks. The Committee, which had initially set principles for these risks in June 2022, notes that varying CSA practices across banks and jurisdictions hinder uniform supervisory standards and result comparability. It seeks stakeholder feedback to potentially enhance global banking regulations and practices, aligning with ongoing efforts by the Financial Stability Board and the Network for Greening the Financial System. #BaselCommittee #ClimateRisks #ClimateScenarioAnalysis #BankingSupervision #RiskManagement #FinancialStability

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Why is granular data important for assessing #climaterisk, for #insurance and #banks ? ‘the effect of flooding, wildfire and other acute climate impacts depend on the unique characteristics of the location in which an asset is situated. One building may flood while a nearby building at a higher elevation may be spared. Realistic climate risk assessments must therefore account for these granular and location-specific factors, hence their importance to prudential risk management and regulators.’

Excellent presentation yesterday by Marian D’Auria at the Climate Bonds Initiative conference. Alongside her observations about the #justtransition as an important business objective (see video below), she also commented that what's driven successful financial outcomes over the past decade is not what's going to drive those outcomes over the next several decades. Why? Due to the greater uncertainty of the operating environment and the need for more complex analysis (incorporate climate and other sustainability factors). The old models are not going to work and we're still working on the models that will replace them. That's a topic that is addressed in Chapter 5 of CFA UK's Certificate in Climate & Investing http://ow.ly/yiMX50LI37u and is a subject that I'm wrestling with. How can we adjust models to better reflect the realities of climate change and create an exchange rate between the present and the future? Answers on a postcard please.

The European Banking Authority (EBA) has released in consultation draft guidelines for banks to identify, measure, monitor and manage environmental, social and governance (#ESG) risks. A good read also for risk managers outside the financial industry to get some insights. #esgrisks #erm

Climate Disclosures - 2024 Scenario Climate risk management and disclosures gained momentum, especially for the financial sector. In 2020 I was amazed with the Bank for International Settlements – BIS publication about the Green Swan (climate risks posing threats to global financial stability). I would never have imagined that 4 years later: 🔸the FSB Task Force on Climate-related Financial Disclosures (TCFD) would have gained major importance 🔸the IFRS Foundation would have created the International Sustainability Standards Board (ISSB) publishing a global climate disclosure standards using TCFD as its basis 🔸the Brazilian capital markets authority (CVM) would have endorsed and turned such global standards mandatory for public-listed companies 🔸BIS would have published a new consultation to upgrade climate-related financial disclosures from banks! Here we are, in the very beginning of 2024 trying to figure out how the Brazilian Central Bank (Banco Central do Brasil) will accommodate S2 and the potential new holistic approach from BIS regarding climate-related financial disclosures. Aligning with the building blocks structure provided by the IFRS, the BIS proposal would work as a third layer posed on the top of S2, aiming at detailing how banks would fulfill their disclosure mandate. This is a good timing for Brazilian banks to review the BIS consultation and provide comments to the quali/quantitative suggestions, in view of the regulation already in force here providing for management of climate-related risks and disclosures (PRSAC, GRSAC and its report). This climate trail got very interesting in a fast-paced way. Wonderful. There is still much more to do. #lowcarboneconomy #sustainabledevelopmentgoals #bioeconomy #sustainableeconomy #sustainability #circulareconomy #climaterisk #climatechange #climateadaptation #climatefinance #climatechangemitigation #climateaction #climate #climateemergency #climatesolutions #climatetech #climategoals #climatechangeadaptation #climatemitigation

The FRB focuses on key areas of financial stability in its recent Financial Stability Report. How does that tie to its current and upcoming regulations and supervision? Check it and links to the KPMG 2024 Key 10 Regulatory Challenges. It's abundantly clear expectations are to continuously assess, evolve and strengthen the risk posture of financial institutions. #KPMGRegulatoryAlert #regulatory #financialservices #KPMGFSRisk

The Basel Committee on Banking Supervision issued a public consultation paper on a #Pillar3 disclosure framework for climate-related financial risks. This work forms part of the Committee's holistic approach to address climate-related financial risks to the global banking system. The Committee is analyzing how a Pillar 3 disclosure framework for climate-related financial risks would further its mandate to strengthen the regulation, supervision and practices of #banks worldwide with the purpose of enhancing financial stability, and the potential design of such a framework. #BCBS #climaterisks #bankingsystem #financialstability #finance #riskmanagement

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