Preparing for Climate Uncertainty: Integrating Robust Climate Risk Stress Testing Models

Article

In the face of growing climate risks, banks must develop and refine climate risk stress testing models to ensure financial resilience. By leveraging interdisciplinary collaboration, cutting-edge methodologies, and comprehensive scenario analysis, banks can align with regulatory expectations and bolster their strategic decision-making processes.

Jul 23, 2024

Doug Baird, Head of Climate Stress Testing and Pension Risk, Natwest Group

Preparing for Climate Uncertainty: Integrating Robust Climate Risk Stress Testing Models

The views and opinions expressed in this content are those of the thought leader as an individual and are not attributed to CeFPro or any other organization

Developing climate risk stress testing models requires continuous improvement and close collaboration with external stakeholders to stay updated on methodologies and data.
Scenario data and granular customer data are essential components, with challenges in data availability and quality being addressed through a multifaceted approach.
Integrating climate risk models into existing risk management frameworks ensures alignment with regulatory expectations and best practices, enhancing the overall risk assessment process.
A cross-functional team is crucial for embedding climate stress testing into business-as-usual processes, ensuring comprehensive risk management and identification of opportunities in the face of climate change.