The NGFS will not do this work in isolation. There is some existing work in this space by others, such as the Glasgow Financial Alliance for Net Zero or GFANZ, and the Science Based Targets initiative or SBTi. It is important that we have a consistent and comparable approach to assessing financial institutions’ transition plans. Next, CLIMATE SCENARIOS. The NGFS will enhance its climate scenarios to sharpen understanding of the impact of physical and transition risks on the financial system. To make sense of the deep uncertainties surrounding climate change, financial institutions need to adopt forward-looking approaches based on scenario analyses as opposed to risk models based on historical data. This is an especially technical area of work where the principle of being science-based cannot be overstated. The NGFS scenarios are widely used. The IMF has started using them for some of its Financial Sector Assessment Programme, or FSAP, work. The scenarios could also potentially be used in future disclosures of climate-related financial risks under the International Sustainability Standards Board, or ISSB, template for better comparability of risk implications. The NGFS will promote wider application of its climate scenarios through enhancements in several areas. We will strengthen the modelling of physical risks, both acute and chronic. We will enhance sectoral granularity and geographical coverage - especially to emerging economies. We will develop short-term scenarios suitable for stress testing and analysis. We will continue to update input data to reflect changes such as new technologies and policies, and the evolution of the economic environment.
The NGFS will facilitate the upskilling of central bankers and supervisors, especially from emerging and developing economies, in climate-related and environmental risks. We will develop a training and capacity building strategy for central banks and supervisors, mapping training needs to supply. We will develop a training curriculum, to help central bankers and supervisors build up their capabilities in a progressive manner, from foundational knowledge to more advanced and specific skillsets. As a final remark, let me stress: climate change is a shared crisis, and the efforts to fight it must be a shared responsibility. Inclusivity is the key to our success. And inclusivity is at the heart of what the NGFS does. We have a diverse membership, across geographies, across stages of economic development, and across a variety of climate related risks and transition challenges. The NGFS will continue to ensure that our work on greening the financial system is inclusive – uncompromising in our ambition to support a Paris-aligned pathway to net zero while meeting the economic and social development needs of our members. In short, a just transition to a sustainable planet. Inclusivity is also a feature of the NGFS when it comes to partnering the financial industry, academia, and standard-setting bodies in charting policies and strategies on how the financial sector can support decisive climate action. We will cast our net wide and tap on the ideas of a range of stakeholders. Given the magnitude and complexity of the challenge before us, nothing less will do.