Thanks to this “coalition of the willing”, gathering today more than 90 central banks and supervisors across the world, high level scenarios were published in July last year, updated a couple of weeks ago by a set of 6 scenarios. This set of global reference scenarios  provide a good basis for financial authorities. Of course, the NGFS should continue to develop and refine those scenarios. However, there will remain the need to tailor those scenarios to the circumstances of each jurisdiction, for instance specifics of their climate policies, or more precise meteorological data at the national level. In addition, ST may legitimately differ along other methodological dimensions. A case in point is the use or not of a dynamic balance sheet assumption. Contrary to the BOE, the ACPR and the ECB have chosen to rely on such assumption, as it allows to take into account the concept of double materiality and to assess how financial institutions would implement their commitments or steer their alignment strategies. The second lesson we learned is that the implementation of scenario analysis can expose data gaps on firms’ exposures. Such data gaps are particularly acute in the case of scenarios, which go beyond the horizons typically considered by firms and their supervisors. This make disclosures of climate-related data and forward looking metrics all the more important to support effective scenario analysis. Progress in this area has already been made, following the COP21, with the creation of the Task Force on Climate-related Financial Disclosures (TCFD).
Denis Beau: Building an appropriate climate stress testing framework for capital markets Opening remarks by Mr Denis Beau, First Deputy Governor of the Bank of France, at the Future Europe Sustainable Europe Global Virtual Conference "Europe’s global response - promoting global financial coordination towards our common sustainable future", 6 July 2021. * * * I would like to thank you very much for your kind invitation to present the work the Banque de France and the ACPR, its supervisory arm, conducted on climate stress-testing and to share some of the lessons we have drawn from it. I will focus my remarks on 1/ the objectives to be set to such exercice 2/ the tools to be used. ***** 1- I think it is not a matter of debate between financial institutions and their supervisors that climate change affect financial institutions through the traditional risks categories they face. Sizing the exposure to and impact of climate-related drivers on those traditional risk categories is however difficult, given the specificities of those climate-related risk drivers, which are not necessarily economic in nature, and the multiple layers of uncertainty which affect them. In particular, data on past changes in climate and their financial impact may be a particularly poor guide to future magnitude and dynamic of climate related risks. In addition, financial institutions decision-making horizons are usually too short-term oriented to fully account for the long time horizon of risks associated with climate change, the so-called “tragedy of the horizon".