FSB.pdf

The Financial Stability Board report discusses the implications of climate change for financial stability, investigating channels through which climate-related risks might impact the financial system. Risks to financial stability from climate change can be divided into physical and transition risks, which could lead to a sharp fall in asset prices, increase uncertainty, and have a destabilizing effect on the financial system. A disorderly transition to a low-carbon economy could also have a destabilizing effect, and climate-related risks may affect how the global financial system responds to shocks, altering asset price movements and amplifying credit, liquidity, and counterparty risks. Financial institutions can take actions to reduce or manage their exposure to climate-related risks, but these actions may not be applied systematically and may be hampered by a lack of data, and individual actions may not mitigate broader climate-related risks to financial stability.