Context and objectives of the session
In the banking sector, climate change is recognized as the foremost existential threat, demanding global cooperation due to its widespread impact. The specific time horizon of climate change necessitates a long-term perspective, while today’s actions will shape the next three decades. Banks, exposed to trillions in carbon-intensive sectors, face financial instability from climate-related risks. Regulators, such as the NGFS and ESAs, are actively assessing these risks through stress tests. Disclosure requirements under the Pillar 3 framework can mitigate information gaps. The recent IPCC report underscores these risks while offering hope for mitigation efforts. However, government intervention is also essential for a smooth transition to a green economy, necessitating global coordination.
The session will focus on the current state of sustainability risk management in the banking sector, recent stress test results, and challenges in integrating sustainability risks into banking regulations.
Questions to be addressed.
- What is the current state of play regarding sustainability risk measurement and mitigation in the banking sector, and what are the lessons learned from previous stress tests?
- How can transition plans serve as valuable sources of information on sustainability risk, and what information in these plans is relevant for risk assessment? What are the policy priorities and timelines for leveraging transition plans for risk assessment?