Tom Sabbatelli-Goodyer’s Post

Origami Risk released the 2024 State of Risk Report. The risk environment continues to evolve exponentially from expanded use of technologies like artificial intelligence, continuing geopolitical instability, and impacts of climate change. Risk professionals from 240 organizations across more than 20 industries responded to the 2024 State of Risk report survey. Based on responses to the survey, this year’s report outlines the key trends and analysis of the previous year in risk and also offers recommendations on how to translate these insights into action. Full report attached. #climate #finance #risk

It’s easy to get desensitised to repeated climate change warnings, with the "hottest [day/month/year] on record" reported with distressing frequency. So this isn’t another ‘alarming article’ but rather a report in which we set out the approach that the financial sector has started to take (and needs to accelerate) to ensure that more is done in the time we have remaining to effectively mitigate the effects of climate change. And it all starts with the simple step of Measurement. Click through below to learn more…

The ECB has published a Working paper on 'Designing a Macroprudential Capital Buffer for Climate-related Risks', investigating the use of macroprudential capital buffers to mitigate systemic aspects of climate-related transition risk. This research provides a macroprudential foundation with a flexible framework that can evolve alongside climate risk practices. Key takeaways: ◾ This paper employs a stress testing approach, enhanced by a bank-specific 'systemic risk buffer' ◾ The 'systemic risk buffer' estimates the percentage of RWA due to climate-related risk based on a comparison of stressed losses in climate scenarios against a baseline scenario. ◾ The methodology's robustness is validated through checks that confirm consistent outputs across different samples and time horizons. ◾ While primarily addressing transition risk and leveraging short-term scenarios, the framework can be adjusted based on specific circumstances to capture broader climate-related financial risks including physical risk. #climaterisk #climatechange #scenarioanalysis #climatescenarios #capitalbuffer #macroprudential #transitionrisk #physicalrisk #sustainability #climateanalytics

ECB's thoughts on Climate Risk. Transition related capital buffers are always an interesting one, because some people would argue that the main problem with the transition is that it's too difficult to happen suddenly, so the requirement for a buffer against a credit shock due to the transition isn't really needed. (Also in a stress test it's hard to take into account that some firm's valuations might be boosted by the transition making them less likely to default).

How can short-term climate scenarios enhance #climateresilience for financial institutions? Our latest report and Excel tool address the crucial gap in short-term scenario analysis, focusing on near-term risks, economic volatility, and systemic vulnerabilities. Produced by UNEP FI's Risk Centre in partnership with the National Institute of Economic and Social Research (NIESR), this report provides asset managers, insurers, bankers, and investors with the tools to integrate climate commitments into short-term planning strategies. By exploring macroeconomic, transition, and physical risk scenarios, our Excel-based tool enables effective management of short-term climate risks. UNEP FI continues to deliver essential frameworks to help financial institutions navigate immediate climate challenges. Discover how these insights can fortify your approach to climate risk management. Read more: https://ow.ly/IN7G50SxmaQ

Climate risk refers to the financial impacts arising from climate-related events such as extreme weather events, changing regulatory frameworks, and shifts in market dynamics due to the transition to a low-carbon economy. These risks can adversely affect the profitability, stability, and resilience of financial institutions and their investments.   Financial institutions that do not proactively manage climate risk may face major financial losses and reputational damage. Therefore, it is vital for them to stay ahead of the curve and navigate the climate risk landscape effectively. Integrating climate risk into financial decision-making is crucial for financial institutions to effectively manage the risks and opportunities associated with climate change. By incorporating climate risk considerations into risk management frameworks and investment strategies, financial institutions can enhance their resilience, meet stakeholder expectations, and contribute to the collective efforts of creating a sustainable future.   Read the full article: https://lnkd.in/geKyRTR5 #aspectadvisory #climaterisk #climatechange #financialhealth #climateriskmanagement #AI #regulations

As climate change intensifies, its impacts are reshaping the financial landscape in many ways. While the Basel Framework has long guided banks in managing financial stability, climate-related risks introduce new and complex challenges that traditional risk models may not fully capture. Climate risk brings unique dynamics, from extreme weather events to economic shifts toward sustainability. These aren’t standard financial risks—they’re evolving and uncertain and could significantly impact financial stability if not managed carefully. While Basel has encouraged voluntary climate risk assessments, industry experts argue that more rigorous, mandatory standards are essential to adequately prepare financial institutions for these emerging threats. Read along to know more! Sandip Mukherjee CFA, FRM, Vivek Gupta, Prateek Mohnot #Aptivaa #ClimateRisk #BaselFramework #RiskManagement

📣 Join our next complimentary #webinar where industry experts David Carlin, Antoine Bezat, Stefan Szilagyi and Arpit Narain, CFA, FRM, CQF will discuss "Addressing Climate Risk Through Effective Stress Testing, Reporting and Governance". 💡 We will delve into how financial institutions navigate the complexities of climate risk through enhanced data governance, strategic tool integration, and innovative approaches to stress testing and reporting.   📅 Click here to register for the live session: https://lnkd.in/dZupWTQS #climaterisk #stresstesting #governance #bankingandfinance #riskmodeling #riskmanagement

🌍 Strengthening Financial Resilience: Macroprudential Policy Against Climate Risks In today's rapidly changing climate landscape, the financial sector's role in fostering stability is more critical than ever. Our latest article, written by Sebastiaan Bredenbeek and based on recent research by the European Central Bank (ECB), explores how we can adapt macroprudential tools - especially the Systemic Risk Buffer (SyRB) - to address climate risks. Key insights include: - Enhancing prudential frameworks to uphold financial stability. - Addressing the systemic nature of climate risks with comprehensive strategies. - Evolving the SyRB to manage these unique challenges effectively. - Exploring innovative calibration methodologies for the Climate SyRB. The article emphasizes the necessity of integrating both microprudential and macroprudential tools to mount a robust response to climate risks. 🔍 As we navigate the complexities of climate change, it’s crucial for banks and regulatory bodies to collaborate, ensuring a resilient financial system capable of adapting to these challenges. 📖 Read the full article to learn more about how RiskSphere is leading the way in Climate Risk Management here: https://lnkd.in/ey-x_6Ck #ClimateRisk #RiskManagement #MacroprudentialPolicy

New climate technologies are needed to decarbonise the economy, but getting them off the ground is capital intensive and comes with a whole host of new risks. Our two-part research series on climate tech and insurance explores the role insurers can play in this space, including through their risk management expertise and investments. Read the key findings in this 4-page summary! https://lnkd.in/dXzvX9VZ