Climate-Related Financial Stability Risks for the United States: Methods and Applications

47 Pages Posted: 12 Jul 2022

See all articles by Celso Brunetti

Celso Brunetti

Board of Governors of the Federal Reserve System

John Caramichael

Board of Governors of the Federal Reserve System

Matteo Crosignani

Federal Reserve Banks - Federal Reserve Bank of New York

Benjamin Dennis

Independent

Gurubala Kotta

University of California, Davis

Donald P. Morgan

Federal Reserve Bank of New York

Chaehee Shin

Board of Governors of the Federal Reserve System

Ilknur Zer

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: July 1, 2022

Abstract

This report has two objectives: 1. Review the available literature on Climate-Related Financial Stability Risks (CRFSRs) as it pertains to the United States. Specifically, the literature review considers several modeling approaches and aims to 1.1 Identify financial market vulnerabilities (e.g., bank leverage), 1.2 Provide an assessment of those vulnerabilities (high/medium/low) as identified by the current literature, and 1.3 Evaluate the uncertainty surrounding these assessments based on interpretation of the findings and coverage of existing literature (high/low). 2. Identify methodologies to link climate risks to financial stability and possible research paths to assess U.S. CRFSRs. The report is structured in three parts. First, it characterizes the potential financial system vulnerabilities of climate change. Second, it describes the major methodologies adopted in studying the implications of climate change and provides an assessment of financial system vulnerabilities identified by the current literature. Third, it discusses how different methodologies can be further developed or combined to assess U.S. CRFSRs.

Keywords: Climate change, Financial stability and risk

Suggested Citation

Brunetti, Celso and Caramichael, John and Crosignani, Matteo and Dennis, Benjamin and Kotta, Gurubala and Morgan, Donald P. and Shin, Chaehee and Zer, Ilknur, Climate-Related Financial Stability Risks for the United States: Methods and Applications (July 1, 2022). FEDS Working Paper No. 2022-43, Available at SSRN: https://ssrn.com/abstract=4160286 or http://dx.doi.org/10.17016/FEDS.2022.043

Celso Brunetti (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

John Caramichael

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Matteo Crosignani

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Benjamin Dennis

Independent

Gurubala Kotta

University of California, Davis ( email )

One Shields Avenue
Apt 153
Davis, CA 95616
United States

Donald P. Morgan

Federal Reserve Bank of New York ( email )

33 Liberty Street
Research Department
New York, NY 10045
United States
212-720-6573 (Phone)

Chaehee Shin

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Ilknur Zer

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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