The climate risk to the financial system is that a combination of climate policy, technological innovation and improving economics for low-carbon activities drive an accelerated demand shift away from high carbon activities, with wide spread asset value disruption. In a previous report, ‘Managing financial system stability and climate change’, HSBC provided a preliminary guide for how banks can apply a climate lens to existing risk management and scenario analysis processes.
Central banks, in their capacity as regulators and supervisors of the financial system, have been exploring approaches that address climate change. Indeed, the Network for Greening the Financial System initiative has quickly grown from 8 members in December 2017, to 55 members and 12 observers by February 2020, demonstrating the appetite for a collaborative approach.
This report, produced by the Official Monetary and Financial Institutions Forum (OMFIF) and MAZARS, is based on survey findings conducted with 33 central banks and supervisory authorities across six regions representing 77 per cent of global GDP between August and December 2019. It finds that 55 per cent of the respondents are actively monitoring risks, with a further 27 per cent actively responding to them. The report also highlights climate risk supervision activities across 20 jurisdictions.