The Bank for International Settlements (BIS) and the Monetary Authority of Singapore (MAS) have developed a blueprint for a platform that integrates regulatory and climate data to help financial authorities identify, monitor and manage climate risks in the financial system.
Integrating climate risk analysis into financial stability surveillance is challenging due to the complex nature of climate change, notable data gaps and limited understanding of how to measure the associated risks. To help tackle this challenge, a blueprint of a climate risk platform has been developed at the BIS Innovation Hub Centre in Singapore through Project Viridis.
The blueprint lays out the key features and metrics required for a climate risk platform. These incorporate data and information on financed emissions, physical risk exposure and forward-looking assessments under different climate scenarios.
“As the impact of climate change on the global financial landscape intensifies, the need for adaptive and forward-thinking strategies has never been more urgent. Project Viridis helps equip financial authorities with the insights needed to integrate emerging climate risks into their analysis – and thereby help promote global financial stability,” said Ms Maha El Dimachki, head of the BIS Innovation Hub Singapore Centre, in a statement.
Ms Celine Sia, assistant managing director (Economics & Knowledge Management) of MAS, said, “Project Viridis is an innovative, collaborative blueprint that leverages technology solutions to systematically track climate-related data and metrices, thereby augmenting regulators’ efforts in assessing physical and transition climate risk exposures of individual banks and the financial system. This project addresses a common need of global financial authorities, and we look forward to further collaboration to expand such toolkit.”
Project Viridis demonstrates how regulatory data can be integrated with climate data, which are extracted from corporate disclosure documents using natural language processing techniques. This provides authorities with insights into climate-related financial risks, helping them form an initial view of financial institutions’ risk exposures, and to identify areas that may require deeper risk assessment.
More information on the platform can be found in the Project Viridis final report published here.