Measuring the Climate Risk Exposure of Financial Assets - Methodological Challenges and Central Bank Practices

Pál Kolozsi, Sandor Ladanyi () and Andras Straubinger ()
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Sandor Ladanyi: Magyar Nemzeti Bank
Andras Straubinger: Magyar Nemzeti Bank

Financial and Economic Review, 2022, vol. 21, issue 1, 113-140

Abstract: In order to understand climate-related risks and opportunities, the availability and transparency of reliable financial information is essential. In this regard, the financial sector plays a special role owing to its ties to other economic sectors, and the exposure of financial institutions highlights the responsibility of central banks. This paper uses the literature related to environmental sustainability reporting as well as practical experience to describe the challenges encountered in assessing the green risks of financial assets (absence and heterogeneity of data, differences in definitions and requirements, lack of a uniform methodology, limits of rating schemes) and also details the climate risk measurement methodologies and practical solutions employed by central banks publishing their own climate-related financial disclosures, i.e. the Bank of England, the Banque de France and the Magyar Nemzeti Bank.

Keywords: climate change; transparency; TCFD recommendations; financial disclosure (search for similar items in EconPapers)
JEL-codes: E58 G32 Q51 Q54 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:mnb:finrev:v:21:y:2022:i:1:p:113-140

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