January 16, 2025
Assessment of Climate-related Vulnerabilities: Analytical framework and toolkit
Climate-related shocks could materialise through abrupt changes in policies, technological innovation and/or consumer preferences (transition risks), or through the materialisation of physical hazards, such as floods, droughts or windstorms (physical risks). These shocks raise concerns over financial institutions’ ability to manage their risks and to continue to provide financial services in certain segments and geographical areas. Climate shocks can interact with existing vulnerabilities in the real economy or in the financial system and threaten financial stability through various transmission channels and amplification mechanisms.
This report introduces an analytical framework that the Financial Stability Board (FSB) will use to trace how physical and transition climate risks can be transmitted and amplified by the global financial system.