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There are many indicators that can measure threats that climate change poses to financial stability. The macroprudential challenge is to corral these indicators into a coherent surveillance framework for managing risk. A recent ECB/ESRB paper harnesses a growing body of evidence on indicators into three primary categories: climate shocks, exposures to these shocks, and financial risks resulting from the interaction of exposure and prevailing vulnerabilities. It argues that existing evidence can be used to tailor a macroprudential approach to addressing climate risks – that is, a strategy to contain risk for banks and for the broader financial system.
Towards macroprudential frameworks for managing climate risk I Presentation of the ECB/ESRB report
Paul Hiebert, Head of Systemic Risk and Financial Institutions Division | European Central Bank Presentation (pdf)
