Integrating Nature Into Debt Sustainability Analysis
Multilateral financial organisations would be making a “grave omission” if they fail to include biodiversity-related risks in debt sustainability analyses, according to this report. …
Results of the 2022 Climate Risk Stress Test of the Eurosystem Balance Sheet
The European Central Bank’s 2022 stress test finds that the Eurosystem’s balance sheet is materially exposed to climate risks and that the corporate bond portfolio is the primary source of exposure.
Building Blocks for Central Banks to Develop Nature Scenarios
This paper says climate risk modelling is improving, but is insufficient for capturing broader nature-related risks. The authors review nature-economy models and give guidance for improving their use in finance.
The Effects of Climate Change on the Natural Rate of Interest
This working paper by the ECB says climate change may reduce natural interest, creating serious issues for monetary policymaking. The authors say an orderly transition would mitigate this, and central banks should address carbon biases to meet mandates.
NGFS Scenarios for Central Banks and Supervisors
The NGFS has released the third iteration of their climate scenarios, updating them with the latest economic and climate data, current national policy commitments and improved modelling of physical risks. …
Not Too Late
This NGFS paper compares current fossil energy price increases to an involuntary price on carbon, arguing that they offer a “narrow but unique opportunity” to accelerate the transition to net zero.
Economic Impacts of Climate Change
Based on input from 48 global banks and investors, this report introduces three new climate-driven macroeconomic shock scenarios, exploring their economic implications using a commonly used short-term global econometric model.
Acute Climate Risks in the Financial System
This paper finds that top-down climate risk approaches, such as those used by the NGFS, are of limited value at the granular scale relevant to the financial sector.
The Macroprudential Challenge of Climate Change
This joint ECB/ESRB report examines how climate shocks can affect the European financial system, identifies transmission channels and amplifiers of climate risk and finds significant threats to European financial stability.
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