Canada: Financial Sector Assessment Program-Technical Note on Climate Risks Analysis

International Monetary Fund

No 2025/234, IMF Staff Country Reports from International Monetary Fund

Abstract: This Technical Note on Climate Risk Analysis highlights that the financial sector in Canada is exposed to both physical and transition climate risks. Canadian regulators are working on advancing climate risk management in financial institutions. The Financial Sector Assessment Program also performed an independent analysis of key physical and transition risks for large deposit takers. The focus of these analyses is on developing methodologies and enhancing awareness of climate risks and associated challenges in climate risk assessment. Results are sensitive to several parameters, such as the damage function and the rate of passthrough of damages to Deposit Taking Institutions. The transition risk analysis finds heterogeneous results by sectors, with notable impacts for heavy emitters. Under the transition scenarios, Non-Financial Corporates’ credit risk would generally increase modestly but with significant variations across sectors. Notable impacts are observed for the oil and gas sector. Both analyses focus on a specific credit risk channel and only capture direct impacts, ignoring indirect and systemic effects, hence potentially underestimating overall climate risks facing the Canadian banking and deposit taking sector.

Keywords: amount share; lending loan amount; pass-through rate sensitivity; damage function sensitivity; lending portfolio; Loans; Financial Sector Assessment Program; Mortgages; Climate change; Insurance; Global (search for similar items in EconPapers)
Pages: 61
Date: 2025-08-08
New Economics Papers: this item is included in nep-ene
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=569527 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfscr:2025/234

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Staff Country Reports from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().