While the development of climate scenario analysis, stress testing scenarios and analytical tools are still in their infancy, the need for integrating them with regular monitoring exercises and overall financial risk assessment has been well recognised. One particular challenge in modelling climate-related risks is the long time horizon which has to be considered.
The climate events may often span across decades, if not centuries, and this may make the data collection exercise quite difficult and the outcomes more uncertain. 15. The fourth and final building block consists of initiatives which are being undertaken or planned by the regulators and supervisors to facilitate transition.