CGFI has released four new reports from research on the Climate Biennial Exploratory Scenario exercise (CBES). The reports assess the impact of CBES on participating financial institutions and insurers, with lessons for future scenario analysis and stress testing.
Through 2022-23, a team of CGFI researchers led by Dr Nicola Ranger has collaborated with the UK’s Climate Financial Risk Forum (CFRF) and the Global Association of Risk Professionals (GARP) to assess the impact of the CBES exercises.
Drawing on interviews, surveys and workshops from participants across finance and insurance, the team’s Survey Report was produced with the UK Climate Financial Risk Forum (CFRF).
Enhanced capacity, lessons for the future
This synthesis highlights:
- Enhanced capacity in participating FIs, including greater awareness of climate risks and greater integration of climate risks into risk management.
- Perspectives from participating FIs and insurers, including areas of strength (enhancing financial risk management) and areas of challenge (such as sizing financial exposures).
- Lessons and next steps for future climate scenario analysis exercises, such as including additional risk areas and addressing data gaps.
Urgent action on data recommended
The team have also released a separate CGFI report on Recommendations for Central Banks, Supervisors, Financial Institutions and Researchers.
Key recommendations include:
- Urgent action across the system, including standards for counterparty disclosure and better asset-level data to tackle key data gaps and enable transition planning;
- Capacity building by financial institutions and professional bodies, enabling FIs to better assess risk and utilise external insights and data;
- A fresh research agenda and greater collaboration between researchers, central banks and FIs to develop better methodologies and standardised guidance for scenario analysis.
Towards these goals, the report calls for the UK Government’s Green Finance Strategy to invest in better scenario development as a public good, and support data generation and enhanced disclosure to underpin green finance.
Two additional reports also detail the perspectives of financial institutions and insurers from CGFI workshops in early 2023.
