Climate risks are evolving, and the market is working to come up to speed on those risks. But historically, that engine hasn’t fully addressed potential risks from climate change. This is partly because we simply do not know the true scope and scale of the environmental risks we take on during our daily economic activities.
While this is welcome news, CCPs (Central Counterparties) need to continuously review their model performance. Given the potential impact of climate risks on financial markets and consequently on CCPs (Central Counterparties), all CCPs need to evaluate how to integrate climate change-related risk adequately into their risk models.