Bank of Canada contributes to new publications by the Network for Greening the Financial System

As a member of the Central Banks and Supervisors Network for Greening the Financial System (NGFS), the Bank of Canada contributed to four publications that aim to improve global understanding of the impact of climate change on the financial system and world economy.

Guide on Climate Scenario Analysis for Central Banks and Supervisors

This guide provides practical advice on using scenario analysis to assess climate risks to the economy and financial system.

The forward-looking nature of climate risks and the inherent uncertainty about future events make them difficult to assess using standard risk modelling methodologies. Scenario analysis offers a flexible what-if framework that is better suited to exploring risks that could materialize in different possible futures.

The guide is based on the initial experiences of NGFS members and observers, including scenario analysis conducted by researchers at the Bank of Canada.

Alongside the guide is a set of reference scenarios from external model providers that estimate various macroeconomic impacts of climate change.

The Macroeconomic and Financial Stability Impacts of Climate Change: Research Priorities

This report discusses the NGFS research priorities related to the analysis of the macroeconomic and financial stability impacts of climate change. Its aim is not only to frame and inform the members’ own research efforts in this area but also to serve as a catalyst to mobilize and unify the broader research community around these research priorities.

The NGFS research priorities follow two main themes: implications for financial system risk assessment and implications for macroeconomic assessment and monetary policy.

Climate Change and Monetary Policy: Initial Takeaways

This report investigates the possible effects of climate change on the conduct of monetary policy. Based on a comprehensive review of existing literature, studies and expert analyses, it provides some early insights into questions that include how climate change can affect macroeconomic variables and how climate-related risks might affect different approaches to monetary policy.

The Bank of Canada joined the NGFS in March 2019 as part of its commitment to improve understanding of the implications of climate change for the economy and the financial system.

The NGFS was established in December 2017 in Paris at the One Planet Summit to strengthen the global response to the Paris Agreement on climate change. Now with 66 members and 12 observers, the NGFS defines and promotes best practices in climate risk management for the financial sector and conducts analytical work on green finance.