Climate-Related Scenarios for Financial Stability Assessment: An Application to France

Abstract

This paper proposes an analytical framework to quantify the impacts of climate policy and transition narratives on economic and financial variables necessary for financial risk assessment. Focusing on transition risks, the scenarios considered include unexpected increases in carbon prices and productivity shocks to reflect disorderly transition processes.
The modelling framework relies on a suite of models, calibrated on the high-level reference scenarios of the Network for Greening the Financial System (NGFS). Relying on this approach, the ACPR has selected a number of quantitative scenarios to be submitted to a group of voluntary banks and insurance companies to conduct the first bottom-up pilot climate-related risk assessment.

Keywords: Climate Change, Scenario Analysis, Economic Modelling, Financial Stability

JEL Classification: : C60, E50, G32, O44, Q40, Q54