NGFS | Jotup

Piero Cipollone: Europe’s tragedy of the horizon: the green transition and the role of the ECB

Retrieved on:

tisdag, maj 28, 2024

Communication, Cyclone, PSPP, Risk, Investment, United Nations Environment Programme, Aggression, Davoodi, Number Two, European Banking Federation, Solar energy, Weather, Congress, ILF, EIOPA, Materiality, Heat, Mineral, Climate, Research, World Meteorological Organization, GDP, Blog, Access, ESRB, NBER, ECB, Climate change, European Environment Agency, European Investment Bank, Private sector, Lithium, European Green Deal, Horizon, Loan, Housing, Complementarity, Civil service commission, European Commission, Shock, Security, NGFS, United Nations, Reproduction, Agriculture, Uncertainty, European Central Bank, European Council, Employment, Environment, Calibration, Network, Wind, Wildfire, Recovery, SSRN, Meteorology, Environmental economics, Carbon, IMF, Frankfurt, Economics, Solidarity, Metal, HICP, Single market, Next Generation EU, CEPR, Carney, Copper, Green, PEPP, Bertelsmann Stiftung, University of Chicago Press, Prejudice, Working paper, Festival, University, Forestry, Speech, Sound, Capital market, Financial system, Growth, Treaty, The Economic Journal, Pension, GCAM, Tragedy, Corporate sustainability, Natural gas, RRF, SAFE, ETS, Copernicus Climate Change Service, Electricity, Renewable energy

We quantify both the direct and the portfolio re-balancing impact, emphasizing the role of investor heterogeneity.

Key Points:

We quantify both the direct and the portfolio re-balancing impact, emphasizing the role of investor heterogeneity.
We use proprietary security-level data on asset holdings of different investors.
We measure the direct impact on security level, finding that it is smaller for securities predominantly held by more price-elastic investors, funds and banks.

Designing a macroprudential capital buffer for climate-related risks

Retrieved on:

tisdag, maj 28, 2024

Methodology, Pressure, Risk, GVA, CRD, Investment, Bank of France, Research Papers in Economics, Social science, Section 3, FSB, Central bank, European, Learning, Canadian International Council, JEL, Ghent University, LGD, GDP, Figure, Section 5, Capital Requirements Directives, ESRB, EAD, ECB, Credit, Probability, Climate change, Journal of Financial Economics, Flood, Reproduction, A4, Corporate finance, Eurosystem, Element, Sale, Ecological economics, Sis, Civil service commission, FSI, European Commission, PPT, Gropp, Financial economics, NGFS, Table, Financial intermediary, Review of Economic Dynamics, LSI, Financial statement analysis, Prudential, DSGE, INSPIRE, CEP, Single, European Central Bank, Paper, RWA, Employment, Literature, Calibration, Medical classification, Network, Journal of Financial Stability, Financial regulation, Wildfire, Mask, Geography, Carbon, ADBI, E61, Research, ISSN, Policy, Climate, Coelho, G21, Environment, Section 2, Robustness, Constantine Dafermos, AnaCredit, Temperature, Acceleration, SSM, PDF, CST, Website, Data, Tax, Council, Section 4, Translation, Bank of England, CEIS, Exercise, Map, BCBS, European Parliament, Buffer, Double, NFC, Bank, Financial system, Growth, NACE, SHSS, Management science, EBA, Electricity, Risk management

Abstract

Key Points:

Abstract
Amid the growing financial vulnerabilities posed by climate change, we investigate macroprudential capital buffers to mitigate systemic risks and increase the resilience of the banking
sector.
Subsequently, we introduce a methodological framework for tailoring bank-specific buffer requirements to cover these losses, offering macroprudential authorities a practical method for
calibrating climate-related macroprudential capital buffers, complementing microprudential
policies.
The study demonstrates the potential of macroprudential capital buffers to mitigate potential climate-related losses and contributes to the
understanding of the appropriate prudential policy response to these challenges.
Second, we propose a calibration methodology for a macroprudential capital buffer which
allows to address the build-up of climate-related systemic risks in the banking sector.
The
proposed calibration methodology assigns different systemic risk buffer requirements to banks
in different buckets depending on each bank?s exposure to the estimated climate risks.
Our findings highlight the potential systemic relevance of climate
risks, while the proposed methodology demonstrates the potential of macroprudential capital
buffers to mitigate climate-related losses.
Overall, this paper makes a significant
step towards operationalizing macroprudential capital buffers for climate-related risks, and can
inform prudential authorities? reflections on how to concretly implement macroprudential tools
to address the build-up of these risks.
Yet, despite the growing consensus on the systemic features of climate risks,
the discussion on the concrete implementation of macroprudential tools for climate risk is only
incipient.
This paper explores how climate risks should be accounted for in the regulatory framework,
providing an analysis of how macroprudential capital buffers can be tailored to effectively address
the systemic aspects of these specific risks.
In Section 2, we discuss the current
policy context around macroprudential policy targeting climate-related systemic risk, as well as
the positioning of the paper in the existing academic literature.
As part of the discussion on incorporating climate-related risk considerations into the prudential framework, macroprudential tools, including capital buffers, are increasingly being considered to address systemic aspects of climate-related risks, complementing microprudential
measures.
Yet, no common methodology currently exists to calibrate such buffer, which may hinder
its actual use to address climate risks, should macroprudential authorities decide to use it.
Our paper also contributes to the policy discussion by tackling some of the challenges
which have been identified regarding the use of macroprudential tools for climate risks.
In
particular, ECB-ESRB (2022) identify the complex calibration as one of the hurdles to overcome
in order to implement a climate SyRB.
(2023) also estimate US banks? exposure to transition risk based on the carbon footprint of
their syndicated loan portfolio.
7
Similarly, earlier work by Campiglio (2016) suggests the use of green macroprudential policy in stimulating
banks to finance low carbon activities.
ECB Working Paper Series No 28xx
10

brown firms could actually even cause a reduction in lending to green firms via a crowding-out
effect.
We contribute to this literature by proposing a harmonized methodological framework,
based on a stress test methodology and granular supervisory data, to quantify a macroprudential capital buffer requirement to tackle climate-related risks in the euro area banking sector.
23
The extent to which the climate SyRB might overlap with other capital (buffer) requirements can also be
used to inform macroprudential authorities? decision on the optimal calibration factor, as discussed in Section 3.3
and 4.3.
The proposed
bucketing methodology also provides macroprudential authorities with sufficient flexibility to
tailor the framework to the particularities of each jurisdiction (EBA, 2020).
Finally, when implementing a bucketing approach, macroprudential authorities need to be
mindful that such approaches have the potential to cause cliff effects.
Hence, a
bucketing approach translating bank-specific projected transition risk losses into capital addons appears to be both more prudent and more efficient.
Assuming
financial institutions do not hold additional provisions beyond the current policies scenario,
transition risk losses will directly affect their capital positions.
We define the excess CET1 ratio
as the bank?s CET1 ratio minus the sum of all capital and buffer requirements (including P2G).
The SyRB is therefore able to
almost fully offset the impact of a transition shock on capital positions at the system-wide level.
31
Assuming banks preserve their capital buffer in response to this increase in capital requirements.
As an example, macroprudential authorities? assessment of the potential overlap of
the climate SyRB with other capital (buffer) requirements may be helpful in this discussion.
The scenario
used for calibration of a macroprudential capital buffer like the SyRB will need to be chosen
carefully to correctly identify realistic sources of systemic risk, including the potential interaction
between transition risk and physical risk.
Fourth, concrete implementation would need to ensure that macroprudential capital buffers are
not targeting climate-related risks already covered by other microprudential or macroprudential
capital (buffer) requirements, to avoid any overlap of requirements and double-counting of risks.

Feedback on the input provided by the European Parliament as part of its resolution on the ECB’s Annual Report 2022

Retrieved on:

torsdag, april 18, 2024

Crypto, European banking union, Governance, Exercise, TARGET, Ciccarelli, Single, Climate, OJ, Ethics, Carbon, ECRB, Parliament, Council, European Systemic Risk Board, European Commission, Paris Agreement, Television, Annual, Letter, Speech, Employment, Social, ESRB, Euro, Prejudice, FSB, AML, ECB, Blog, Risk, ESCB, Committee, NGFS, Policy, Woman, Suggestion, Radio, GDP, Privacy, Weather, Person, Climate change, Communication, Digital, Intelligence, Economic and monetary union, SSM, Bias, Knowledge, Mentorship, EMU, Commission, Economy, Publication, Annual report, Financial Action Task Force, Orientation, Nickel, NPL, European Central Bank, Uncertainty, Financial Stability Board, Conference, NCBS, Treaty, Growth, Financial system, Central bank, European Parliament, Network, Natural Resources, COVID-19, Terrorism, Bank, Female, IMF, Multi-function printer, Recreation, Memorandum, Data, AMLA, Security printing

Beyond managing related risks, the financial sector can also contribute to the transition toward a net-zero economy.

Key Points:

Beyond managing related risks, the financial sector can also contribute to the transition toward a net-zero economy.
Our work aims to enhance data transparency in climate change analysis, while informing monetary policy, financial stability and banking supervision.
The indicators we have developed focus on the euro area financial sector and are built from harmonised granular datasets.

Frank Elderson: Taking into account climate and nature in monetary policy and banking supervision around the world

Retrieved on:

onsdag, april 3, 2024

This box investigates how households have responded to the 2021-23 inflationary episode using evidence from the ECB’s Consumer Expectations Survey.

Key Points:

This box investigates how households have responded to the 2021-23 inflationary episode using evidence from the ECB’s Consumer Expectations Survey.
The findings suggest that households have primarily adjusted their consumption spending to cope with higher inflation.

S&P Global Market Intelligence and Oliver Wyman Enhance Climate Credit Analytics with Addition of Climate-related Physical Risks

Retrieved on:

onsdag, oktober 25, 2023

NEW YORK, Oct. 25, 2023 /PRNewswire/ -- S&P Global Market Intelligence and Oliver Wyman today announced the enhancement of the S&P Global Market Intelligence Climate Credit Analytics solution to include both climate-related physical and energy transition risk. The addition of S&P Global Sustainable1 data providing information on the physical risk exposure and related financial impact for over 20,000 companies mapped against a range of seven climate change related hazards across a range of four CMIP6 Shared Socioeconomic Pathway (SSP) climate change scenarios will support clients as they seek to understand and manage the physical and financial exposure of corporates and portfolios to climate change.

Key Points:

NEW YORK, Oct. 25, 2023 /PRNewswire/ -- S&P Global Market Intelligence and Oliver Wyman today announced the enhancement of the S&P Global Market Intelligence Climate Credit Analytics solution to include both climate-related physical and energy transition risk.
Developed through a collaboration between S&P Global Market Intelligence and Oliver Wyman, Climate Credit Analytics was launched in June 2021 to help financial institutions and corporations assess how a changing climate and the transition to a low-carbon economy will impact the creditworthiness of their counterparties and investments.
The solution translates climate scenarios into scenario-adjusted financials and scores at the company level by combining S&P Global Market Intelligence's advanced Credit Analytics risk models and unique industry-specific datasets with Oliver Wyman's industry-leading climate scenario and stress testing capabilities.
For additional information on Climate Credit Analytics, please visit S&P Global Market Intelligence .

GCP releases annual sustainability report

Retrieved on:

torsdag, september 14, 2023

Exercise, Data management, Learning, GLP, Emerging Capital Partners, NGFS, Policy, GCP, Data collection, Materiality, Biodiversity, GRI, Investment, Ethics, Global Sustainability Assessment System, ESG, Health, Safety, Renewable energy

SINGAPORE, Sept. 14, 2023 /PRNewswire/ -- GLP Capital Partners ("GCP"), a leading global alternative asset manager that focuses on thematic investing across real assets and private equity, has released its inaugural sustainability report, prepared in reference to Global Reporting Initiative (GRI) Universal Standards 2021.

Key Points:

SINGAPORE, Sept. 14, 2023 /PRNewswire/ -- GLP Capital Partners ("GCP"), a leading global alternative asset manager that focuses on thematic investing across real assets and private equity, has released its inaugural sustainability report, prepared in reference to Global Reporting Initiative (GRI) Universal Standards 2021.
"While this is GCP's inaugural sustainability report, in many ways, it is a continuation of previous sustainability reports from GLP and reflects our organization's ongoing commitment to the integration of sustainability into our business and investment practices," said Alan Yang, Chief Executive Officer of GCP.
"Last year we refreshed our materiality assessment to consider the evolution of our business as a result of our reorganization," said Meredith Balenske, Head of Global Sustainability and ESG of GCP.
For more information on GCP's ESG and sustainability efforts, visit: https://gcp.com/responsible-investing/

Datamatics TruFare Automatic Fare Collection Enables Memphis Area Transit Authority (MATA) With Next Generation Fare Ticketing System, Elevating the Commuter Experience

Retrieved on:

torsdag, augusti 24, 2023

Datamatics, a leading global Digital Technologies, Operations, and Experiences Company, today announced its collaboration with the Memphis Area Transit Authority (MATA) to launch GO901 Smart Card System.

Key Points:

Datamatics, a leading global Digital Technologies, Operations, and Experiences Company, today announced its collaboration with the Memphis Area Transit Authority (MATA) to launch GO901 Smart Card System.
MATA’s Next Generation Fare System (NGFS) is an Automatic Fare Collection (AFC) system.
Rahul Kanodia, Vice Chairman and CEO of Datamatics expressed, "Our participation in MATA's Next Generation Fare System (NGFS) marks a significant stride towards elevating commuter experience.
He added, "With over 30 successfully delivered AFC projects worldwide, Datamatics is dedicated to elevating commuter experiences across the world.”
Datamatics stands out as a robust Automatic Fare Collection (AFC) solution provider.

Results of the 2022 climate risk stress test of the Eurosystem balance sheet

Retrieved on:

torsdag, mars 30, 2023

Exercise, Housing, NGFS, Network, Financial system, Risk management, Risk assessment, Carbon, Climate change, Time, Risk, ECB, Public sector banks in India, Security printing, Cryptocurrency, Security (finance), Eurosystem

In 2022 the ECB conducted a climate risk stress test of the Eurosystem balance sheet as part of its action plan to include climate change considerations in its monetary policy strategy.

Key Points:

In 2022 the ECB conducted a climate risk stress test of the Eurosystem balance sheet as part of its action plan to include climate change considerations in its monetary policy strategy.
[1] The aims of this exercise were to (i) analyse the sensitivity of the Eurosystem’s financial risk profile to climate change; and (ii) enhance the Eurosystem’s climate risk assessment capabilities.
This climate risk stress test used scenarios developed by both the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) and the ECB.
Under the disorderly transition scenario, the implementation of climate policies is delayed, leading to severe transition risk but only limited physical risk.
These shocks are based on the aforementioned 2022 climate risk stress test by ECB Banking Supervision as well as on NGFS data.
This climate risk stress test of the Eurosystem balance sheet used the Eurosystem’s financial risk assessment framework as the basis for its risk estimation, using the aforementioned shocks.

Frank Elderson: Delivering on the Glasgow Declaration: actions by the ECB on the road through Sharm El-Sheikh to a Paris-compatible path

Retrieved on:

fredag, november 11, 2022

[1]

Key Points:

[1]
I have since passed the baton of chairing the NGFS to Ravi Menon, Managing Director of the Monetary Authority of Singapore.
In our monetary policy, for example, last month we started tilting our corporate bond purchases towards issuers with a better climate performance.
And in our work as banking supervisors, we have continued to roll out what I previously described as an immersive approach to the supervision of climate-related and environmental risks.
[2] An approach in which these risks are fully integrated into the day-to-day activities of our joint supervisory teams, who are in constant contact with banks.
For the banks under our supervision, we are contributing to this by proactively sharing the good practices we see.
And that end can be one thing only: practices and policies that are fully aligned with a Paris-compatible transition path.
But we cannot assess the success of our actions based on our point of departure.
Droughts, floods, heatwaves, and biodiversity loss are undeniably on the rise as very real manifestations of the climate and environmental crises.
Join us in urgently taking all the steps necessary to ensure that our journey through Sharm El-Sheikh takes us to Paris in time.

COP27 UN "Credible" Plan to Meet NetZero with No Greenwashing is a "Boom and Fizzle" Demolished by Finnish Materials Study says Friends of Science

Retrieved on:

torsdag, november 10, 2022

CALGARY, Alberta, Nov. 10, 2022 /PRNewswire-PRWeb/ -- As reported by the National Observer, Nov. 08, 2022, the UN High Level Expert Group (HLEG) led by Catherine McKenna, claims to outline a credible plan to achieve net-zero greenhouse gas emissions to prevent greenwashing, but Friends of Science says the UN HLEG forgot to do a feasibility study; a Finnish materials study by Simon Michaux renders the UN greenwashing report moot and a 'boom and fizzle.' Friends of Science Society expresses concern over the evermore tyrannical tone of demands for mandatory reporting and NetZero compliance, when it is a physical impossibility.

Key Points:

Friends of Science Society expresses concern over the evermore tyrannical tone of demands for mandatory reporting and NetZero compliance, when it is a physical impossibility.
Friends of Science have issued an Open Letter to the Competition Bureau exposing the fallacy of the charges, one fact being that NetZero targets are unattainable, confirmed by Simon Michaux's comprehensive study.
The CLINTEL group of more than 1400 scientists and scholars say there is no climate emergency; natural factors drive climate change.
Friends of Science Society is an independent group of earth, atmospheric and solar scientists, engineers, and citizens that is celebrating its 20th year of offering climate science insights.