ESG Stress Testing for Financial Institutions

Date: 19-22 Sept 2022


For financial institutions, measuring and managing market and credit risk is a relatively straightforward process done through established tools, models and methodologies.

However, accurately identifying and measuring the complex risks directly associated with climate change (and other important events) is a significantly more challenging task. It is, however, a task that financial institutions must now undertake, and with a high degree of accuracy, in order to satisfy stakeholders and supervisors.

Closely linked to identifying and measuring climate-related risks is ESG disclosure and scenario analysis. Again, two new and specialized activities that must now be understood by financial institutions and those who regulate them.

As well as the inherent importance of being able to accurately assess the climate-related risks of financial portfolios, financial regulators are now requiring the effective linkage of climate-related disclosure and scenario analysis, and the development of rigorous holistic stress testing programs.

Through the development and adoption of such programs, financial institutions will be able to strengthen their resilience and risk management frameworks against climate-related risks and other ESG-related metrics.

Key Takeaways and Learning Objectives

  • Gain an understanding of what exactly is climate risk and how it affects financial institutions
  • Know what climate risk disclosures are and look like
  • Understand key terms and projection metrics
  • Evaluate data sources and scenario generation
  • Assess what modeling approaches are applicable for stress testing
  • Identify the role of regulatory authorities
  • Understand risk mitigation and control tools


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