Overview of Climate Risk Scenario Analysis and Stress Testing:Basic Concepts and Regulatory Frameworks
The prerequisite for proactively preventing climate-related financial risks is the ability to accurate-ly identify and assess them,and climate risk scenario analysis and stress testing have appropriately become one of the effective tools.Through the active practice of major international organizations and some forward-looking fi-nancial regulatory authorities,climate risk scenario analysis and stress testing are gradually being integrated into the macro and micro prudential regulatory assessment toolkit.On the macro level,regulatory authorities periodical-ly convene financial institutions to conduct systemic climate risk stress testing and actively guide these institutions in establishing climate risk management frameworks.On the micro level,regulatory authorities encourage financial institutions to conduct their own tests in a timely manner,starting with qualitative and descriptive scenario analy-ses,and gradually transitioning to quantitative stress testing.The trend of incorporating climate-related risks into China's macro prudential regulatory framework is becoming increasingly clear,with regulatory authorities actively promoting the implementation of climate risk scenario analysis and stress testing.The likelihood of regularly orga-nizing such tests in the future is high.Moreover,while there is currently no unified testing framework in place,it is not out of the question that financial institutions may be required to conduct their own tests in the future.
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