Gustavo Bernal Torres
Investors Should Prepare For Impact Of Green Stress Tests On Banks
Central bankers look at powerful tool to nudge financial system to address climate risks.
The world’s central banks are going green. At a recent “Green Swan” conference for regulators, the world’s top central bankers agreed they had a clear role to play in tackling climate change. But which measures are the most important? And how much would their actions shift the cost of capital for high and low carbon companies?
Stress tests have been the single most consequential change in financial regulation since the financial crisis. They set the pace for capital and operational planning for banks simulating crises as a way to protect against them. They were central to the banks’ resilience during the pandemic. Will climate stress tests be as effective?