Example: marketing

Basel Committee on Banking Supervision

Basel Committee on Banking Supervision Climate-related financial risks measurement methodologies April 2021 This publication is available on the BIS website ( ). Bank for International Settlements 2021. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISBN 978-92-9259-471-8 (online) Climate-related financial risks measurement methodologies iii Contents .. iv Executive Summary.

level of damage which can be expected at different levels of intensity of a hazard. For example, when a storm surge hits an area with weak building regulations and few flood mitigation measures, it is more vulnerable to loss compared to an area that has strong flood control infrastructure and strong building regulations.

Tags:

  Hazards, Floods

Information

Domain:

Source:

Link to this page:

Please notify us if you found a problem with this document:

Other abuse

Transcription of Basel Committee on Banking Supervision

1 Basel Committee on Banking Supervision Climate-related financial risks measurement methodologies April 2021 This publication is available on the BIS website ( ). Bank for International Settlements 2021. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISBN 978-92-9259-471-8 (online) Climate-related financial risks measurement methodologies iii Contents .. iv Executive Summary.

2 1 1. Introduction .. 4 2. Methodological Considerations .. 6 Conceptual considerations in measuring climate-related financial risks .. 6 Data needs .. 10 The role and characteristics of a micro-prudential climate-risk classification .. 12 Candidate methodologies .. 15 Characteristics of scenario analysis and stress -testing methodologies .. 18 3. Measurement methodologies of climate-related financial risks .. 22 Exposure mapping and measurement .. 22 Risk quantification: scenario analysis, stress-testing and sensitivity analysis.

3 27 4. Areas for future analytical exploration .. 35 Exposure mapping: the challenge of risk differentiation .. 35 Forward-looking assessment methodologies: Accounting for complexity of climate-related financial risks .. 39 5. Conclusion .. 43 References .. 45 Annex: Methodology Comparison .. 49 iv Climate-related financial risks measurement methodologies Glossary Acute physical risk See physical risks Basel Framework The Basel Framework is the full set of standards of the Basel Committee on Banking Supervision (BCBS).

4 As at March 2021 the framework consists of 14 standards as set out at Carbon taxation (carbon tax) A carbon tax (or energy tax) generally refers to a tax levied on the carbon content of some goods and services, typically in the transport and/or energy sectors. The purpose is to reduce CO2 emissions by increasing the price of these goods and services. It is one of the main types of tools used in climate change policies around the world. Chronic physical risk See physical risks Climate Climate in a narrow sense is usually defined as the average weather, or more rigorously, as the statistical description in terms of the mean and variability of relevant quantities over a period of time ranging from months to thousands or millions of years.

5 The classical period for averaging these variables is 30 years, as defined by the World Meteorological Organization. The relevant quantities are most often surface variables such as temperature, precipitation and wind. Climate in a wider sense is the state, including a statistical description, of the climate system. Climate-related financial risks The potential risks that may arise from climate change or from efforts to mitigate climate change, their related impacts and their economic and financial consequences.

6 Climate sensitivity The change in the annual global mean surface temperature in response to a change in the atmospheric CO2 concentration or other radiative forcing. Climate vulnerability Vulnerability is the propensity or predisposition to be adversely affected. It encompasses a variety of concepts and elements including sensitivity or susceptibility to harm and lack of capacity to cope and adapt. In the context of climate risk drivers, vulnerability refers to the level of damage which can be expected at different levels of intensity of a hazard.

7 For example, when a storm surge hits an area with weak building regulations and few flood mitigation measures, it is more vulnerable to loss compared to an area that has strong flood control infrastructure and strong building regulations. Vulnerability assessments may include secondary impacts such as business interruption. Damage functions Relationships translating the effect of a specific hazard or change in global mean temperature affecting a building structure or the real economy into a damage ratio, which is the ratio of the repair cost to its replacement value.

8 Energy label Energy labels describe various levels of energy efficiency, eg of buildings. Energy efficiency refers to the amount of energy required to provide a specific function, product or service (eg heating a building), with the idea that the lower the needed amount happens to be, the more efficiently the function, product or service is provided. ESG ESG (environmental, social and governance) refers to a set of criteria that play a role in the investment decision-making process or in a company s operations.

9 Environmental factors consider how an investment or a company contributes to environmental issues such as climate change and sustainability. Social factors examine the social impacts of an investment or a company on communities. Governance relates to transparency and legal compliance of an investment or a company s operations, for instance in terms of accounting and shareholders rights. Feedback loop An interaction in which a perturbation in one climate quantity causes a change in a second and the change in the second quantity ultimately leads to an additional change in the first.

10 A negative feedback loop is one in which the initial perturbation is weakened by the changes it causes; a positive feedback loop is one in which the initial perturbation is enhanced. The initial perturbation can either be externally forced or arise as part of internal variability. Global mean surface temperature Estimated global average of near-surface air temperatures over land and sea-ice, and sea surface temperatures over ice-free ocean regions, with changes normally expressed as departures from a value over a specified reference period.


Related search queries