July 12, 2022
Publication of “Discussion Paper – Study on Climate-related Scenarios Analysis: Characteristics of NGFS Scenarios and their Applications in Climate-related Financial Risk Analysis”
As the international trends, climate change is embedded into financial institutions’ risk management and the supervisory approach as a risk that could affect the soundness of financial institutions and the stability of the financial system. It is pointed out that climate-related risks have a longer period of risk materialization than traditional financial risks and imply higher degrees of uncertainty. In other words, they exceed the scope of conventional risk management for financial institutions. Therefore, these days, the scenario analysis, whereby relevant financial risks are measured based on the assumed future climate scenarios, is becoming the main risk measurement method.
Each financial institution is expected to measure and manage the climate-related risks under appropriate governance system. To enable this, it is important for not only the departments in charge (for instance, risk management departments) but also the whole organization of the financial institution (typically its management members) to recognize the importance of managing climate-related risks and to deepen the understanding of the scenario analysis which should be an effective method for measuring the said risks. However, many of the published materials on scenario analysis contain only technical aspects; and available materials in Japanese are yet insufficient.
Thus, JFSA has entrusted Central Research Institute of Electric Power Industry with a research project to compile basic materials regarding the scenarios and data that are widely used internationally, such as the common scenarios, etc. publicly released by NGFS (The Network of Central Banks and Supervisors for Greening the Financial System). Purpose of the research is as follows: enable the financial institutions in Japan to understand the implications of scenario analysis at an early timing; raise the utility of scenarios, etc. in Japan; and contribute to the international discussions regarding the planned scenario revisions and data improvement from now.
Please see below for the English version of the survey report.
・”Discussion Paper – Study on Climate-related Scenarios Analysis: Characteristics of NGFS Scenarios and their Applications in Climate-related Financial Risk Analysis” [English, Excerpted version]（PDF：4,299KB）
International Affairs Office, Strategy Development and Management Bureau
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