Kevin Stiroh: A microprudential perspective on the financial risks of climate change Remarks by Mr Kevin Stiroh, Executive Vice President of the Financial Institution Supervision Group of the Federal Reserve Bank of New York, at the 2020 Climate Risk Symposium, Global Association of Risk Professionals (delivered via videoconference), 10 November 2020. * * *  Introduction Good morning and thank you for the opportunity to participate in GARP’s2020 Climate Risk Symposium. As shown by the strong turnout today, attention on climate-related financial risks is clearly growing within finance, both for the private sector and the public sector. Today, I’ll speak about these risks from a microprudential perspective—that is, the impact on specific financial institutions, particularly banks, and how firms are managing those risks. I’ll also provide a short update on some of the work under way through the Basel Committee’s Task Force on Climate-Related Financial Risks—the TFCR. Before proceeding, I’ll emphasize that I am speaking only for myself and not necessarily the Federal Reserve System or the Federal Reserve Bank of New York. Risk Management Perspective From a supervisory perspective, a primary focus is to ensure that banks operate in a safe and sound manner and manage risks so they are resilient to a range of shocks. As you know, the core of effective risk management includes identifying, measuring, and managing traditional banking risks like credit risk, market risk, operational risk, or liquidity risks. These risks can materialize from a range of shocks—a recession, a geopolitical event, or a bad actor. And climate change.
In particular, I think it will require ongoing collaboration between the private and public sectors to push the industry toward greater resilience to the financial risks of climate change. Discussions like this one are a critical step in that direction. Thank you for your attention. 1 Federal Reserve Board of Governors, Supervision and Regulation Report, November 2020. 2 Stiroh, Kevin J., The Basel Committee’s Initiatives on Climate-Related Financial Risks, October 14, 2020. 3 Basel Committee, Climate-Related Financial Risks: A Survey of Current Initiatives, April 30, 2020. 4 David J. Snowden and Mary E. Boone, “A Leader’s Framework for Decision Making," Harvard Business Review,  November 2007. 2/2  BIS central bankers' speeches