The Federal Reserve has asked the six largest US banks to compile data on how their businesses would be affected by the consequences of climate change and the transition to a low-carbon economy as part of a pilot effort to ensure the financial system is prepared for the risks posed by global warming.
The scenario analysis, including estimates of how real estate portfolios could be affected by “physical risk” and how corporate lending could be affected by the transition to a net zero-carbon economy by 2050, “are neither forecasts nor policy prescriptions,” the US central bank said.
Instead, the analysis aims to “provide an understanding of how certain climate-related financial risks might play out” in terms of changes in loan default probability, losses and internal risk assessments.
After the speech of Jerome Powell, Chairman of the Federal Reserve Board, a few days ago, this initiative of the FED is reassuring. However, we are still a long way from European initiatives, such as what the European Central Bank can do in terms of physical risks and transition risks.
Green RWA 