Gaby Frangieh’s Post

The financial sector is often the first to push forward some of the most progressive ideas out there ... even when it comes to fines. Up to 5% of daily revenue for a bank, can be quite a substantial amount 💰 💰 💰 In November 2020, the ECB published a catalogue of recommendations for banks to identify and manage climate and environmental risks as part of their governance, strategy and overall risk management mainly lodged with their borrowing clients. For example, one recommendation asks banks to quantify the amount or percentage of carbon-related assets in each portfolio. #climatechange #banks #ECB #ESG #sustainability #finance

#ESG in #LatinAmerica Ana Luci Grizzi does a great job here of setting out important developments on #Brazil's Central Bank and its public consultation on enhancing the disclosure of #climate, #environmental and #social risks by the country's financial institutions. If you follow me you know, Latin American countries are not slowing their roll on #ESG despite the cooling with the #SEC in the #US or standards out of the #EU. If you ESG team doesn't speak LatAm, let's talk: mowen@ambientelegal.com #melonlatam #finance #sustainablefinance #reporting

How does climate change impact banks? And how can #banks practically integrate #climate #risk into their risk management frameworks? Climate risks are inherently different in nature to the risks traditionally managed by banks (credit, market, operational). As the climate changes, banks will need to operate amongst increasing uncertainty, balancing their strategic ambitions with prudently managing the risk. This means making climate-risk informed assessments of new loan applications, understanding climate-related risks embedded into the existing lending portfolio, and managing financial resources such as capital resources in the context of climate related risks. Last week Sharanjit Paddam, Senthooran Nagarajan, John Evans and I presented our paper for the Actuaries Institute Summit which addresses these issues, and provides practical guidance for banks to effectively manage the impact of climate risk. Read our paper here: https://lnkd.in/ehjguBEA

Maybe climate scenarios *are* malarkey? I've been a proponent of climate scenario analysis (CSA) for years as a risk management tool, but even my faith has been rattled by two papers published this week by the Bank of England and Basel Committee on Banking Supervision. These seem to admit that current macro-climate scenarios aren't useful from a financial risk analysis standpoint, and need "extending" or add-ons if they are to provide helpful insights. Is this a damning indictment of the current state of CSA? Do we need to go back to the drawing board? Or is this a healthy reassessment we should take confidence in? Read the full article by becoming a 'Unpacking Climate Risk' subscriber, and share your thoughts below! https://lnkd.in/etQHci9t #climaterisk #climatescenarios #NGFS #ESG #riskmanagement #sustainability

During its Annual Meeting, the World Bank published the "Rising to the Challenge: Success Stories and Strategies for Achieving Climate Adaptation and Resilience" (https://lnkd.in/eNsbQTCE), detailing the achievements and challenges of its reducing climate and disaster impacts. The financial sector is pivotal to all of its six pillars in measurement: (1) foundation: economic growth and inclusive development; (2) adaptation of people and firms; (3) lang use plans and critical public assets; (4) disaster risk management; (5) macrofiscal; and (6) application: institutions, implementation, and monitoring. At Ceres, Inc., we work closely with investors, banks, insurance companies, and their regulators to advocate for positive behavior changes and create the enabling policies for that. Press release: https://lnkd.in/eQ4whpiH Full Report:

#banks #capital #buffers #resilience #Basel #CRR #CRD #BRRD #systemic #climaterisk #scenarios #ECB #macroprudential I want to believe smart risk managers already include these scenarios in their own capital planning and allocation steering, and that banks already include them in finance contracts too. Projecting climate scenarios further on their own loan portfolio, building on the ECB's climate risk stress test they just had to do anyway. Why wouldn't they? European Banking Federation https://lnkd.in/eZaFWz4q

Well, now we are talking. ECB published a paper about a capital buffer linked with the climate risk. This may be the first steps on imposing a capital charge on banks which are not serious enough on climate. Based on the results of the paper, most of the banks would receive a SyRB (Systemic Risk Buffer) of 50bps, while the maximum a bank would receive is 200bps. Cummulated, the SyRB would equal 51 billion EUR. The study covered 107 Significant Institutions from Euro Zone, and is only looking to the transition risk. So, this is only a minimum amount. The "real" amount will be larger. The buffer is depending on the transition risk losses as percentage of RWA. #EY #ClimateRisk #Banking

Climate scenario analysis has become a central focus for banks and financial institutions, with regulatory expectations becoming more stringent and firms required to understand and assess both short- and long-term financial risks associated with climate change. Publication of this Phase II paper in February 2024 follows the development of a conceptual framework published by ISDA in 2023 to identify the main building blocks needed to develop climate risk scenarios for the trading book. During the second half of 2023, ISDA tested the framework in collaboration with more than 30 member banks and developed three climate scenarios (physical, transition and combined). The output of this initiative includes a detailed set of scenario parameters covering a range of market risk factors, including country and sectors. The below page by ISDA can also be checked for the excel template provided to conduct the above mentioned climate scenario analysis: https://lnkd.in/d7x_mvhu #climaterisk #climatescenario #tradingbook #climateriskmanagement #riskmanagement #physicalrisk #transitionrisk #GRC #capitaladequacy #GRC #riskassessment #riskmeasurement #riskframework #ESG

Noting the regulatory authorities focus on inclusion of Climate Risks in terms of the overall risk assessment frameworks, the attached document published on April 22 by Reserve Bank of New Zealand uses stress testing to assess the resilience of banks and insurers to severe but plausible risks. The Climate Stress Test, which was the main bank stress test for 2023, had two main objectives: 1) To assess the financial impacts of a scenario involving climate-related risks on our largest banks’ balance sheets; and 2) To uplift industry capability in managing such risks. This report provides key findings and aggregate quantitative results of the stress test. The scenario designed, called ‘Too Little Too Late', which combines high physical risks from climate change, expected to increase in the future, with high transition risks, i.e. risks that may materialise through global and domestic efforts to decarbonise the economy. It was designed to be potentially stressful, consistent with using severe but plausible scenarios in stress testing to protect and promote the stability of the financial system. #climaterisk #stresstesting #ESG #GRC #riskassessment #riskmeasurement #riskframework #transitionrisk #physicalrisk #risk #scenario #decarbonization #disclosure #stress #simulation

𝐉𝐮𝐬𝐭 𝐢𝐧 𝐓𝐢𝐦𝐞 "𝐓𝐡𝐞 𝐢𝐦𝐩𝐚𝐜𝐭 𝐨𝐟 𝐄𝐂𝐁 𝐁𝐚𝐧𝐤𝐢𝐧𝐠 𝐒𝐮𝐩𝐞𝐫𝐯𝐢𝐬𝐢𝐨𝐧 𝐨𝐧 𝐂𝐥𝐢𝐦𝐚𝐭𝐞 𝐑𝐢𝐬𝐤 𝐚𝐧𝐝 𝐒𝐮𝐬𝐭𝐚𝐢𝐧𝐚𝐛𝐥𝐞 𝐅𝐢𝐧𝐚𝐧𝐜𝐞" Click here to read more: https://lnkd.in/ejQgWmrk The paper explores the effects of the ECB’s supervisory actions on climate #riskmanagement and sustainable finance among banks, in particular, the introduction of the climate-risk-related supervisory efforts since 2020 to enhance banks' awareness and preparedness for managing climate-related risks. The first analysis are included in the «Guide on C&E Risks» and in the first climate risk #stresstest in 2022 where aims to assess the impact of these supervisory efforts on banks' climate risk exposure and management, as well as their green finance activities. Authors: Gianluca Abate, Bianca Ghilardi, Marco Najm and Tommaso Travenzoli #ECB #ESGRisk #ClimateRisk #SustainableFinance #DataQuality