The Bank for International Settlements (BIS) and the Monetary Authority of Singapore (MAS) are joining forces to combat climate-related risks in the financial system.

They have developed a blueprint for a platform that combines regulatory data with climate information. This will empower financial authorities to identify, track, and manage these emerging threats.

Integrating climate risk analysis into financial stability checks is a complex challenge. Climate change itself is multifaceted, data on its impact is often scarce, and measuring the associated risks remains a work in progress. Project Viridis, spearheaded by the BIS Innovation Hub Centre in Singapore, tackles this challenge by proposing a climate risk platform blueprint.

This blueprint outlines the essential features and metrics needed for such a platform. It will incorporate data on financed emissions, physical risks posed by climate change, and future-looking assessments based on various climate scenarios.

"As the impact of climate change on the global financial landscape intensifies, the need for adaptive and forward-thinking strategies has never been more urgent," says Maha El Dimachki, Head of the BIS Innovation Hub Singapore Centre. "Project Viridis helps equip financial authorities with the insights needed to integrate emerging climate risks into their analysis – and thereby help promote global financial stability."

Project Viridis is a collaborative and innovative blueprint. It leverages technology to systematically track climate-related data and metrics. This will enhance regulators' ability to assess climate risk exposure – both physical and transitional – for individual banks and the entire financial system.

"Project Viridis is an innovative, collaborative blueprint that leverages technology solutions to systematically track climate-related data and metrices, thereby augmenting regulators' efforts in assessing physical and transition climate risk exposures of individual banks and the financial system," says Celine Sia, Assistant Managing Director (Economics & Knowledge Management) at MAS. "This project addresses a common need of global financial authorities, and we look forward to further collaboration to expand such toolkits."

Project Viridis paves the way for integrating regulatory data with climate data extracted from corporate disclosures using natural language processing techniques. This empowers authorities with insights into climate-related financial risks, allowing them to gain a preliminary understanding of financial institutions' risk exposure and pinpoint areas requiring deeper assessment.

For more information on the platform, refer to the Project Viridis final report.

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Source: BIS