Climate Risk Models
Debate between Baroness Vere of Norbiton and Earl Russell(10 months ago)
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Baroness Vere of Norbiton (Con)
The outcome of the CBES exercise shows that, if banks and insurers do not respond effectively, climate risk could cause a persistent and material drag on profitability: bank credit losses amounted to £110 billion over the late-action CBES scenario. But the Bank of England has always been clear that it was the first time it had done an exercise based on these scenarios, which came from 2021, as I am sure the noble Baroness knows. The NGFS has now refreshed its scenarios, publishing its latest group in November 2023; those will be used by the Bank of England and, indeed, by many other people in the financial system going forward.
Earl Russell (LD)
My Lords, the best way to avoid financial collapse is to avoid climate tipping points. We welcome the progress to date on developing financial climate risk models, but this science is still in its infancy. We also welcome the Bank of England’s report of 13 March, updating its assessment of climate risks. The report notes the need to improve climate stress testing and scenario analysis. How will the Government support the development of these urgent tasks?