Remarks at City Week Panel 2022

Abstract

First, climate change may result in financial losses that differ significantly from historical precedents. Therefore, historically calibrated models may understate climate-related financial risks, and addressing the risks associated with climate change might require greater reliance on future estimates/scenarios. Second, there are issues associated with the time horizon over which climate-related financial risks will manifest themselves. There is also potential for market participants to “pull forward” certain risks. In terms of duration, it is possible that climate-related financial risks will result in more prolonged stress periods than those observed in the past. And third, there remain incomplete data and methodological challenges associated with the measurement of the risks. It will take some time to address these issues, and they cannot be resolved in isolation by the Basel Committee.