GCBC Logo

Introduction for Supervisors to Scenarios and Stress Tests of Climate Change Risks

Introduction for Supervisors to Scenarios and Stress Tests of Climate Change Risks

Year Published

2023

Contributing Organizations

International Monetary Fund (IMF)
Global Affairs Canada (GAC)
Toronto Centre
The Swedish International Development Cooperation Agency (Sida)

Type of Resource

Guidance
Tool

Languages

English

Relevant Topics

Core Topic
Risk Management
Topic 2
Climate Reporting

Target Audience

All

Relevant Geography

Global
Introduction for Supervisors to Scenarios and Stress Tests of Climate Change Risks

Resource Description

This resource introduces financial sector supervisors to scenarios and stress testing of climate risks. It provides background on climate scenarios, and guidance on the design of climate stress tests.

Why This Matters

Supervisors have an important role to play in the analysis of climate-related financial risks, with scenario analysis and stress testing being critical tools for assessing the potential risks that climate change poses for financial institutions.

Key Insights

  • Explains the role of scenarios and stress testing in assessing the various risks posed by climate change – with further explanations on sensitivity analysis, designing climate scenarios, and NGFS scenarios
  • Distinguishes between the advantages of two types of stress-testing: ‘bottom-up’ and ‘top-down’
  • Outlines what climate scenarios, methodologies and information should be used for designing stress-tests
  • Further provides an example of a pilot stress test by The Bank of England

Was this resource helpful?

We'd love to hear from you! You can share your feedback or suggest a resource below.

Related Resources