The scenarios bring together the financial and economic impacts of different temperature and climate policy pathways – a critical input for firms and policymakers to understand the future impact of the decisions they are making today. Scenario analysis makes questions like how resilient is this business, this financial system, or this set of policies, to each climate scenario possible to address. Accordingly, the Bank continues to be a strong advocate of the NGFS’ work and in 2019 announced our intention to assess the resilience of individual banks, insurers, and the wider UK financial system to different 1 2  See ‘Tackling climate for real: the role of central banks’ speech by Andrew Bailey, June 2021 NGFS climate scenarios 2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  climate scenarios through a Climate Biennial Exploratory Scenario exercise (CBES). I am pleased to say that exercise, which draws on the NGFS scenarios, will launch next week on 8 June. The CBES will involve the UK’s largest banks and insurers and explore three different climate scenarios, testing different combinations of physical and transition risks over a 30-year period. It is an important tool to size the financial exposures, to understand how different bank and insurance business models will be affected and how they might respond, and finally as a way of improving firms’ risk management practices through the process of carrying out the exercise.
In addition, this year COP26 has an ambitious agenda that spans all of the areas that I have spoken about today – in particular establishing a better understanding of best practice, and fostering greater technical cooperation. The Glasgow Financial Alliance for Net Zero (GFANZ)12 initiative will do this by bringing together over 160 firms (responsible for assets in excess of $ trillion) for the first time. Such technical collaboration and cooperation is no less important among central banks and supervisors. The NGFS with the scope of its membership is key to that exchange of knowledge. The Bank has widely shared what we have learnt and we will continue to do so.13 The creation of the Central Banks’ and Supervisors’ Climate Training Alliance (CTA) will also further support technical cooperation and assistance on climate risks. Let me conclude. In spite of the Covid-19 pandemic, central banks have continued to make progress in responding to climate change, but we know there is still work to be done. The next stage of our journey will require us to deepen our analysis, evolve our approaches and further our collaboration. The coming year will be critical for all of us on this journey – in allowing us to better convert climate change risks into something that we can tackle for real. 12 13  See New Financial Alliance for Net Zero Emissions Launches, UNFCCC, April 2021 See Centre for Central Banking Studies, Bank of England 7  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  7