United Nations Environment Programme Finance Initiative (UNEP FI)’s Post

💡 📊 📈 New UNEP FI-NEIRS Short-term Climate Scenarios Narratives developed for bankers, asset managers, insurers, and investors. (Report & Spreadsheet visualization tool included) #climatescenario #climateresilience #climaterisk #unepfi #neirs #banking #assetmanagement #insurance #ESGinvesting

ECB's thoughts on Climate Risk. Transition related capital buffers are always an interesting one, because some people would argue that the main problem with the transition is that it's too difficult to happen suddenly, so the requirement for a buffer against a credit shock due to the transition isn't really needed. (Also in a stress test it's hard to take into account that some firm's valuations might be boosted by the transition making them less likely to default).

The ECB has published a Working paper on 'Designing a Macroprudential Capital Buffer for Climate-related Risks', investigating the use of macroprudential capital buffers to mitigate systemic aspects of climate-related transition risk. This research provides a macroprudential foundation with a flexible framework that can evolve alongside climate risk practices. Key takeaways: ◾ This paper employs a stress testing approach, enhanced by a bank-specific 'systemic risk buffer' ◾ The 'systemic risk buffer' estimates the percentage of RWA due to climate-related risk based on a comparison of stressed losses in climate scenarios against a baseline scenario. ◾ The methodology's robustness is validated through checks that confirm consistent outputs across different samples and time horizons. ◾ While primarily addressing transition risk and leveraging short-term scenarios, the framework can be adjusted based on specific circumstances to capture broader climate-related financial risks including physical risk. #climaterisk #climatechange #scenarioanalysis #climatescenarios #capitalbuffer #macroprudential #transitionrisk #physicalrisk #sustainability #climateanalytics

Empowering Financial Resilience: A Deep Dive into Climate Risk Analytics In this webinar, S&P Global, in partnership with Oliver Wyman, will explore the current frontiers of climate risk analytics. Participants can expect to gain an understanding of the latest approaches and capabilities to address market needs for modeling physical and transition climate-related financial risks. #climatestresstesting #Centralbanksguidline #cop28 #climaterisk #physicalrisk

𝗖𝗹𝗶𝗺𝗮𝘁𝗲 𝗥𝗶𝘀𝗸 𝗟𝗮𝗻𝗱𝘀𝗰𝗮𝗽𝗲 𝗥𝗲𝗽𝗼𝗿𝘁 𝟮𝟬𝟮𝟰 In 2023, temperatures shattered records with a 116-day streak of peak temperatures. As the urgency to address and adapt to the pressing threat of climate change rapidly grows, the financial sector recognises its pivotal role in addressing climate risks, and financial institutions are increasingly looking to integrate climate change-related risks into their strategic frameworks.  The 2024 Climate Risk Landscape Report serves as a 𝗰𝗼𝗺𝗽𝗿𝗲𝗵𝗲𝗻𝘀𝗶𝘃𝗲 𝗿𝗲𝘀𝗼𝘂𝗿𝗰𝗲 𝗱𝗲𝗹𝘃𝗶𝗻𝗴 𝗶𝗻𝘁𝗼 𝘁𝗵𝗲 𝗮𝘃𝗮𝗶𝗹𝗮𝗯𝗹𝗲 𝘁𝗼𝗼𝗹𝘀 𝗳𝗼𝗿 𝗳𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗶𝗻𝘀𝘁𝗶𝘁𝘂𝘁𝗶𝗼𝗻𝘀 𝘁𝗼 𝗮𝘀𝘀𝗲𝘀𝘀 𝗽𝗵𝘆𝘀𝗶𝗰𝗮𝗹 𝗮𝗻𝗱 𝘁𝗿𝗮𝗻𝘀𝗶𝘁𝗶𝗼𝗻 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗿𝗶𝘀𝗸𝘀 𝗮𝗻𝗱 𝗯𝗼𝗼𝘀𝘁 𝘁𝗵𝗲𝗶𝗿 𝗶𝗻𝘀𝘁𝗶𝘁𝘂𝘁𝗶𝗼𝗻’𝘀 𝗿𝗲𝘀𝗶𝗹𝗶𝗲𝗻𝗰𝗲 𝘁𝗼 𝗿𝗲𝗹𝗮𝘁𝗲𝗱 𝗶𝗺𝗽𝗮𝗰𝘁𝘀. This edition provides best practices for tool utilisation, case studies, and recommendations to navigate the dynamic climate risk tools market. It also offers insights into the rapidly evolving regulatory developments around climate-related disclosure frameworks and recent market developments.   Building upon the foundational work of United Nations Environment Programme Finance Initiative (UNEP FI)’s Climate Risk and FSB Task Force on Climate-related Financial Disclosures (TCFD) Programme, the report is designed for #banks, #insurers and #investors looking to enhance their capabilities in climate risk management and facilitate the global transition towards sustainability. Assess the report here: https://lnkd.in/dcgqTeeX

Scenario Analysis is a KEY TOOL to assess financial risks arising from climate change, as standard risk modelling cannot adequately capture the unprecedented nature of climate risks and the inherent uncertainty of future climate – related events (bis.org). The consequences of climate risks touch every corner of our economy with the potential for cascading damages and unprecedented systemic risk to globally interconnected systems. Examples of these damages on vulnerable communities, extremely existing inequalities, increasing cost to the government (whitehouse.gov/cea).              ‘Toward a Framework for Assessing and Using Current Climate Risk Scenarios Withing Financial Decisions’, a Discussion Paper by Moritz Baer, Matteo Gasparini, Ryan Lancaster and Nicola Ranger is worth your time and read and re read. In this paper, the authors argue that ‘current scenarios (even the ones advocated by some Central Banks and supervisors are likely closer to the lower end of the range of plausible future risk for both physical and transition risk’, this ‘has implications for both stress testing and risk management, and business planning,’ according to them. For more on the important characteristics and processes that are critical to fully understand the potential severity and timescales of climate risks please read the full Discussion Paper attached!   #climateriskmanagement #scenarioanalysis #climateriskmodelling #MoritzBaer #MatteoGasparini #RyanLancaster #NicolaRanger #sustainability #physicalrisks #transitionrisks #systemicrisks #globalinterconnectedness #sustainabilityandriskmanagement #sustainabledevelopment #sdgs #expandyoursustainabilityknowledge

Scenario Analysis is a KEY TOOL to assess financial risks arising from climate change, as standard risk modelling cannot adequately capture the unprecedented nature of climate risks and the inherent uncertainty of future climate – related events (bis.org). The consequences of climate risks touch every corner of our economy with the potential for cascading damages and unprecedented systemic risk to globally interconnected systems. Examples of these damages on vulnerable communities, extremely existing inequalities, increasing cost to the government (whitehouse.gov/cea).               ‘Toward a Framework for Assessing and Using Current Climate Risk Scenarios Withing Financial Decisions’, a Discussion Paper by Moritz Baer, Matteo Gasparini, Ryan Lancaster and Nicola Ranger is worth your time and read and re read. In this paper, the authors argue that ‘current scenarios (even the ones advocated by some Central Banks and supervisors are likely closer to the lower end of the range of plausible future risk for both physical and transition risk’, this ‘has implications for both stress testing and risk management, and business planning,’ according to them. For more on the important characteristics and processes that are critical to fully understand the potential severity and timescales of climate risks please read the full Discussion Paper attached!   #climateriskmanagement #scenarioanalysis #climateriskmodelling #MoritzBaer #MatteoGasparini #RyanLancaster #NicolaRanger #sustainability #physicalrisks #transitionrisks #systemicrisks #globalinterconnectedness #sustainabilityandriskmanagement #sustainabledevelopment #sdgs #expandyoursustainabilityknowledge

In this webinar, we delve into the challenges faced by financial institutions and strategies to quantify risks through climate scenario analysis and stress testing. We'll explore the relationship between transition and physical risks, emphasize the importance of time horizons in risk analysis, and discuss approaches to mitigate these risks. Register today: https://ow.ly/QzcH50QHpCH #ReimagineYourRisk

In this webinar, we delve into the challenges faced by financial institutions and strategies to quantify risks through climate scenario analysis and stress testing. We'll explore the relationship between transition and physical risks, emphasize the importance of time horizons in risk analysis, and discuss approaches to mitigate these risks. Register today: https://ow.ly/QzcH50QHpCH #ReimagineYourRisk #esg #climaterisk #creditrisk #stresstesting

In this webinar, S&P Global, in partnership with Oliver Wyman, will explore the current frontiers of climate risk analytics. Participants can expect to gain an understanding of the latest approaches and capabilities to address market needs for modeling physical and transition climate-related financial risks.