Climate Risk and Bank Capital Structure

“This paper lends support to the importance of the #climatechange-related #risks into #prudential #supervision to protect the #financialsystems #resilience and contributes to the debate on #climate-related #capitalrequirements.” Lire

Climate Change Stress Testing for the Banking System

The paper explores the potential inclusion of #climatechange #risks in the #prudential #regulatoryframework, specifically discussing adjustments to #capitalrequirements and changes to the #riskmanagement and #governance framework. The paper argues in favor of the latter but is more cautious regarding the former. Lire

Measuring the Climate Risk Exposure of Insurers

The findings suggest a positive association between #insurers larger exposures to #risk and higher holdings of #brownassets with higher sensitivity to #climatechange and #transition risk. Lire

Regulatory Capital and Catastrophe Risk

A #regulatory #reform that imposes greater regulatory #capital #costs for #insurers to provide property coverage in catastrophe-prone areas results in price increases, though the magnitude of the increases is restrained due to #insurance pricing #regulation. The increase in price is commensurate to 12-30% of the increase in regulatory capital costs due to catastrophes, and the […]

Climate Stress Testing

This paper that explores the design of #climate #stresstests to assess #macroprudential #risks from #climatechange in the #financialsector. The authors review current climate stress #scenarios employed by #regulators, highlighting the need to consider dynamic policy choices, better understand feedback loops between climate change and the economy, and explore compound #riskscenarios. They argue that more research is needed to identify channels through which plausible scenarios can impact credit risks, […]

Climate Risk and Canadian Banks: Is More Capital Required?

It highlights the increasing #regulatory focus on #climaterisk faced by #canada‘s #banks, both domestically through the #osfi and globally through the adoption of guidelines proposed by the #tcfd. As regulators seek to impose more #monitoring, #disclosure, and mitigation obligations on #financialinstitutions, the article raises whether banks’ #capitalrequirements should be increased to reflect the #risks associated with #climatechange. Lire

Corporate Disclosure of Climate Change Risk – A Pilot Study

The paper discusses the proposed #climatechange #disclosure rules by the #sec, which would mandate companies to provide detailed disclosures on the impact of climate change on their financial performance and policies. The authors conducted a study using hand-collected data from 99 annual reports of 34 S&P 500 companies from 2019 to 2021, finding that 91% of the #annualreports included some disclosures […]

Macroprudential policies and climate risks

“Insights from scenario analysis may help inform the use of ‘hard’ macroprudential tools to foster the robustness and resilience of the banking system against climate-induced shocks. Against the backdrop of the ongoing reform of the EU’s macroprudential framework, the paper explores how the macroprudential toolkit could be adjusted to the reality of climate-related financial risks.” […]

International Banking Regulation and Climate Change

” The global climate crisis and the economy’s green transition are giving rise to new types of risks for banks. This paper analyses some of the key international bank regulatory standards, namely disclosure, risk management, governance and regulatory capital. “ Lire

ESG, Stakeholder Governance, and the Duty of the Corporation

“… ESG, properly understood, is merely a collection of quite disparate risks that corporations face, from climate change to human capital to diversity to relations among the board, management, shareholders, and other stakeholders.” Lire

Flood Risk Insurance: A Micro-Economic Foundation

“… we characterize Pareto-optimal risk-sharing contracts in a market with multiple policyholders and one representative insurer. With minimal assumptions on the risk measures of the parties involved, we characterize Pareto optimality in terms of the minimization of a sum of the agents’ risk positions, and we relate it to both the core and coalitional stability of an associated market game. […]

Irreversible Adaptation and Knightian Climate Uncertainty

“We model a setting where a firm must choose when to adapt to climate-induced resource scarcity based on objective expectations of climate change (climate projections), and is influenced by both risk (annual variability in climate projections) and ambiguity (inability to assign probabilities to various climate projections).” Lire

How Climate Change May Impact Operational Risk

“… climate change may drive operational risk losses through complex interactions between three factors: changes in human and institutional behaviors, significant and rapid changes in economic metrics and direct physical impacts.” Lire