Legal & Regulatory News

​Bank of England outlines climate change financial risk scenario for 2021

As part of the investigation into the resilience of the UK's financial system to physical and transition risks associated with different climate pathways, the 2021 Biennial Exploratory Scenario (BES) was published by the Bank of England (BoE) on 8 June.

The BoE's desired outcomes from the Climate BES (CBES) are to:

calculate the financial exposures of participants and the financial system to climate-related risks;

comprehend challenges to participants’ business models from these risks; and

assist participants in enhancing their management of climate-related financial risks including engaging counterparties to understand their vulnerability to climate change.

The CBES will explore three scenarios whereby early, late and no action is taken, based on a subset of the Network for Greening the Financial System scenarios. This will allow exploration of the transition risks associated with moving to net zero emissions and the physical risks of increased global temperatures. The results of this exercise are expected to be published in May 2022.

Click here to access the 2021 Biennial Exploratory Scenario.