Commercial, GHG Emissions  -  September 30, 2022

Federal Reserve Launches Pilot Climate Project With Banks

Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo are participating in a pilot project with the Federal Reserve. 

The Federal Reserve Board announced that these banks will participate in a pilot climate scenario analysis exercise designed to enhance the ability of supervisors and firms to measure and manage climate-related financial risks, according to a statement. 

Scenario analysis—in which the resilience of financial institutions is assessed under different hypothetical climate scenarios—is an emerging tool to assess climate-related financial risks. There will be no capital or supervisory implications from the pilot.

The pilot exercise will be launched in early 2023 and is expected to conclude around the end of the year. At the beginning of the exercise, the board will publish details of the climate, economic, and financial variables that make up the climate scenario narratives.

The banks will analyze the impact of the scenarios on specific portfolios and business strategies. The board will then review firm analysis and engage with those firms to build capacity to manage climate-related financial risks. The Board anticipates publishing insights gained from the pilot at an aggregate level, reflecting what has been learned about climate risk management practices and how insights from scenario analysis will help identify potential risks and promote risk management practices.