Integrating climate risk Now I’ll touch on some examples of how we are incorporating climate change considerations into our work to help the financial system play its role in identifying, pricing, and allocating risk. Stress Testing Here at the Reserve Bank, we began incorporating climate risks into our stress testing last year.
Stress testing is a tool used to assess the resilience of financial entities to severe but plausible shocks. Traditionally, we have used this to explore financial stability risks during ENDORSEMENT UNCLASSIFIED  UNCLASSIFIED  economic downturns. Expanding this to include climate risks helps us and industry to build capabilities to assess and understand the impact of climate change on the financial system.