Bank of England makes first steps towards stress-testing climate change risks

The Bank of England is the first Central Bank to perform a comprehensive stress test on how resilient the financial system is in the face of risks posed by climate change. In this sense, it has issued a discussion paper, setting out its proposals that govern the framework for the pioneering 2021 Biennial Exploratory Scenario (BES).

The 2021 BES will test how well the current business models of the largest banks and insurers will withstand three sets of climate scenarios, in which they take early, later or no action to meet emissions target, as well as more broad exposure to the impact of climate change.

This article provides further insight on this two-part exercise.