Bank of England proposes to stress test financial stability implications of climate change

Climate Change 2

The Bank of England is consulting on its proposed framework for the 2021 Biennial Exploratory Scenario (BES) exercise, in relation to climate-related risks.

The objective of the BES is to test the resilience of the largest banks and insurers (firms) to the physical and transition risks associated with different possible climate scenarios.

The BES will also assess the financial system’s exposure more broadly to climate-related risks.

The BES will use exploratory scenarios to size these future risks and explore how firms might respond to them materializing, rather than testing firms’ capital adequacy.

Further details are available here.

Photo Credit: Pixabay

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