PHYSICAL IMPACT
Extreme weather, Disasters, Business disruption, Asset destruction, Migration,
TRANSITION IMPACT
Regulations, Technology, Consumer preferences
Lower value for stranded assets, energy price increase due to dislocation,
FINANCIAL LOSSES: Market loss, credit loss, underwriting loss, operational risks, liquidity risks
CENTRAL BANK ROLE
- Set interest rate
- Aid government achieve economic objectives
- Maintain financial stability
Ensure financial market price reflect all relevant RISKS
CLIMATE CHANGE RISK VS CREDIT RISK
- Far reaching impact
- Irreversible
- Foreseeable nature
- Dependent on short-term actions
TASK-FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURE (TCFD)
Climate Related Risk (CRR)
Recommended Disclosures
Guidance
Supplementary Guidance
Financial
Banks, Insurance, Asset Manager, Asset Owners
Non-financial
Energy, Transportation, Materials, Building, Food, Agricultural, Forest Products
Four THEMES: Governance, Strategy, Risk Management, Metrics and Targets
TRANSMISSION CHANNELS
Climate Risk to Financial Risks
MICRO: Affecting individual businesses and households
Property damage, stranded assets
MACRO: Aggregate Impacts on macroeconomy
The Finance Industry Transition to Sustainability: Climate Science, Societal Issues, Regulation & Accounting
Chapter 2: The Paris Agreement, 1.5 Degree Target versus Net Zero Target