Finance institutions’ climate stress testing will grow

2021 ◽  
Keyword(s):  
Climate Change ◽  
Financial Institutions ◽  
Stress Testing ◽  
Capital Requirements ◽  
Content Type ◽  
Climate Stress ◽  
Significant Divergence ◽  
Related Stress ◽  
Combat Climate Change ◽  
Huge Challenge

Significance Although there is agreement on baseline scenarios, modelling presents a huge challenge due to the unprecedentedly lengthy timescales, and there is a risk of significant divergence by country. Impacts Banks and insurers will manage their exposures to polluting versus carbon-friendly sectors; this could hasten national energy transitions. US policies will be key, given US President Joe Biden’s focus on international action to combat climate change. As financial institutions become more aware of the climate implications of their decisions, they will adopt more sustainable strategies. As confidence in climate change-related stress-testing improves, it will be incorporated into broader prudential capital requirements.

Stress Testing to Assess Recovery from Extreme Events

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
M. John Plodinec
Keyword(s):  
Climate Change ◽  
United States ◽  
Financial Institutions ◽  
Extreme Events ◽  
Stress Testing ◽  
The United States ◽  
The Other ◽  
New Approach ◽  
Rapid Spread ◽  
Potential Benefits

Abstract Over the last decade, communities have become increasingly aware of the risks they face. They are threatened by natural disasters, which may be exacerbated by climate change and the movement of land masses. Growing globalization has made a pandemic due to the rapid spread of highly infectious diseases ever more likely. Societal discord breeds its own threats, not the least of which is the spread of radical ideologies giving rise to terrorism. The accelerating rate of technological change has bred its own social and economic risks. This widening spectrum of risk poses a difficult question to every community – how resilient will the community be to the extreme events it faces. In this paper, we present a new approach to answering that question. It is based on the stress testing of financial institutions required by regulators in the United States and elsewhere. It generalizes stress testing by expanding the concept of “capital” beyond finance to include the other “capitals” (e.g., human, social) possessed by a community. Through use of this approach, communities can determine which investments of its capitals are most likely to improve its resilience. We provide an example of using the approach, and discuss its potential benefits.

Solvency stress testing of Islamic commercial banks

2016 ◽  
Vol 7 (2) ◽  
pp. 112-147 ◽  
Author(s):  
Jamshaid Anwar Chattha ◽  
Simon Archer
Keyword(s):  
Commercial Banks ◽  
Stress Testing ◽  
Profit Sharing ◽  
Capital Requirements ◽  
Capital Adequacy ◽  
Stress Tests ◽  
Regulatory Requirement ◽  
Content Type ◽  
Numerical Example ◽  
Remedial Actions

Purpose This paper aims to provide a methodology for designing and conducting solvency stress tests, under the standardised approach as per IFSB-15, including the establishment of macro-financial links, running scenarios with variation of assumptions and stress scenario parameters; apply and illustrate this methodology by providing a stylised numerical example through a tractable Excel-based framework, through which Islamic Commercial Banks (ICBs) can introduce additional regulatory requirements and show that they would remain in compliance with all capital requirements after a moderate to severe shock; and identify the potential remedial actions that can be envisaged by an ICB. Design/methodology/approach The paper uses the data of the one of the groups to which certain amendments and related assumptions are applied to develop a stylised numerical example for solvency stress-testing purposes. The example uses a Stress Testing Matrix (STeM; a step-by-step approach) to illustrate the stress-testing process. The methodology of the paper uses a two-stage process. The first stage consists of calculating the capital adequacy ratio (CAR) of the ICB using the IFSB formulae, depending on how the profit sharing investment account (PSIA) are treated in the respective jurisdiction. The second stage is the application of the stress scenarios and shocks. Findings Taking into account the specificities of ICBs such as their use of PSIA, the results highlighted the sensitivity of the CAR of an ICB with respect to the changes in the values of alpha and the proportion of unrestricted PSIA on the funding side. The simulation also indicated that an ICB operating above the minimum CAR could be vulnerable to shocks of various degrees of gravity, thus bringing the CAR below the minimum regulatory requirement and necessitating appropriate remedial actions. Practical implications The paper highlights various implications and relationships arising out of stress testing for ICBs, including the vulnerability of an ICB under defined scenarios, demanding appropriate immediate remedial actions on future capital resources and capital needs. The findings of the paper provide a preliminary discussion on developing a comprehensive toolkit for the ICBs similar to what is developed by the International Monetary Fund Financial Sector Assessment Programme. Originality/value This paper focuses on the gap with respect to the stress testing of capital adequacy. The main contribution of the paper is twofold. The first is the development of an STeM – a step-by-step approach, which provides a method for simulating solvency (i.e. capital adequacy) stress tests for ICBs; the second is the demonstration of the potentially crucial impact of profit-sharing investment accounts and the way they are managed by ICBs (notably the smoothing of profit payouts) in assessing the capital adequacy of the ICBs.

African cocoa grower disparities will mar reform plans

2018 ◽  
Keyword(s):  
Climate Change ◽  
West Africa ◽  
Emerging Markets ◽  
Palm Oil ◽  
Ivory Coast ◽  
Content Type ◽  
Health Trends ◽  
Cocoa Products ◽  
Combat Climate Change ◽  
Planting Season

Subject West Africa cocoa prospects. Significance Global cocoa markets are expected to remain oversupplied during the 2017/18 planting season, with Ivory Coast and Ghana -- which together account for 60% of world supplies -- expected to produce 1.9 million tonnes and 850,000 tonnes respectively. Thereafter, the slump in prices could deter investments in plantations, particularly in Ivory Coast where the farm gate price has been slashed. This could could sow the seeds of a new boom cycle -- especially if it compounds longer-term supply bottlenecks that have resulted from underinvestment in rehabilitating ageing and diseased tree stocks. Impacts Deforestation from cocoa farming will come under increased scrutiny as a result of international goals to combat climate change. Health trends in Western markets could reduce structural appetite for cocoa products amid flagging demand in emerging markets. Farmers are likely to switch to other crops like rubber and palm oil if prices fail to recover quickly.

scholarly journals Sustainable management of agriculture products value chain in responses to climate change for South-Eastern coast of Bangladesh

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Prabal Barua ◽  
Syed Hafizur Rahman ◽  
Maitri Barua
Keyword(s):  
Climate Change ◽  
Value Chain ◽  
Sustainable Management ◽  
Value Chains ◽  
Community Based ◽  
Content Type ◽  
Sustainable Value ◽  
Agriculture Products ◽  
Combat Climate Change ◽  
Adaptation Options

PurposeThis paper is designed to assess the sustainable value chain approaches for marketing channel development opportunities for agricultural products in coastal Bangladesh to combat climate change through an approach of community-based adaptation options.Design/methodology/approachThe study was designed to select the potential value chain candidate and to analyze and establish a value chain map to benefit the crop farmers. In this connection, the resources of the whole context were evaluated. The approach uses few tools to generate three outputs, the last of which are the final list of value chains selected for in-depth assessment to design interventions as community-based adaptation practices of the study to combat climate change in the study areas.FindingsThe study demonstrated that the difference in the institutional circumstances of the end markets of the agriculture products is connected to the different categories of harmonization and control of the facilitating environment throughout the supply chains. National and local networks improve the value chain in terms of the value addition of the agriculture products, technology improvement, market access and profitability of the products. Strengthening the weak financial structure, focus more on formal financial systems and resolving sociocultural and climate change-induced hazard concerns are the major concerns on the development of value chains in the countries. Apparently, guarantee for good governance, checking illegal and unregulated market contexts, proper mitigation measures to climate change are some paramount important issues for the sustainable management of livelihood, yield, income and development.Practical implicationsAll kinds of stakeholders of the agriculture product value chain should focus on competitiveness and productivity and look for and exploit multiple ways to add value once initial success has been attained with a single deal. Ensuring sustainability within the value chains is an important feature to cater to the challenges and changing demands of the age.Originality/valueThe study will help to established a sustainable value chain approach in response to climate change, which process will help to existent opportunities for firms to manage the issue of climate risk by codeveloping and employing adaptation options that may be more preferred or accepted by consumers across the entire chain for the sustainable management of livelihood, yield, income and development.

Backsliding is likely on Paris climate deal

2015 ◽  
Keyword(s):  
Climate Change ◽  
Global Warming ◽  
Paris Agreement ◽  
Legal Issue ◽  
Refugee Status ◽  
The West ◽  
Content Type ◽  
Paris Climate Agreement ◽  
Combat Climate Change ◽  
Political Economic

Subject The Paris climate agreement. Significance The Paris agreement is the first major international pact to combat climate change since the Kyoto Protocol of 1997. If implemented, the pact envisions robust national efforts to reduce greenhouse gas emissions and cope with the adverse effects of global warming, with significant political, economic, social and sectoral implications. Impacts Paris accord transparency measures will facilitate carbon divestment campaigns in the West. Aviation and shipping emissions are likely to be addressed in a future Paris accord review conference. Migration from climate change-vulnerable states will reopen the legal issue of internationally recognised 'climate refugee' status.

The Gulf will lag on climate action, despite exposure

2020 ◽  
Keyword(s):  
Climate Change ◽  
Clean Energy ◽  
Content Type ◽  
High Profile ◽  
Oil Revenue ◽  
Climate Action ◽  
Gulf States ◽  
Summer Temperatures ◽  
Tackle Climate Change ◽  
Combat Climate Change

Significance On the same day, opening speakers in a high-profile forum in Abu Dhabi highlighted the emirate’s commitment to renewable energy. Despite the rhetoric and their own vulnerability, however, the Gulf Cooperation Council (GCC) countries are lagging behind global efforts to tackle climate change and remain heavily dependent on oil revenue. Impacts Forecast rises in summer temperatures will deter foreign investment and expatriate workers in future. A collapse in oil prices would cut the funding available to develop clean energy. Failure to stem wasteful hydrocarbons energy consumption will make it harder for renewables to compete. Gulf states’ populations will be largely disengaged from global efforts to combat climate change.

Mapping the field: a bibliometric analysis of land use and carbon emissions (LUCE) research from 1987 to 2018

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chunhui Liu ◽  
Kongqing Li
Keyword(s):  
Climate Change ◽  
Land Use ◽  
Carbon Emissions ◽  
Developed Countries ◽  
Knowledge Structures ◽  
Content Type ◽  
Research Areas ◽  
New Ideas ◽  
Active Research ◽  
Combat Climate Change

PurposeOne of the most critical and active research areas in the field of climate change in recent years has been the interaction between land use and carbon emissions (LUCE). As there is a lack of data to represent the knowledge structure and evolution of LUCE between 1987 and 2018, this paper turned to CiteSpace in order to identify and visualize the cited references and keyword networks, the distribution of categories and countries and highly cited references in connection to LUCE research. Two indicators, betweenness centrality (BC) and citation burst (CB) embedded in CiteSpace, were utilized to investigate the knowledge structures.Design/methodology/approachTwo indicators, BC and CB embedded in CiteSpace, were introduced to investigate the knowledge structures.FindingsFirstly, pre-2000 papers provide the main theoretical foundation for LUCE research, and the innovation of computer technology also provides new ideas and methods for related research. Secondly, greenhouse gas emissions from agriculture are attracting more attention. As agriculture also involves food security, the pressure on agriculture to reduce carbon is enormous, and more research and policy investment will be needed in the future. Thirdly, although the natural sciences ranked highly on BC detection, social and humanities sciences have contributed more to the LUCE research with an increasing emphasis on regional and global governance to combat climate change. Finally, keen interest in carbon emissions and sustainable development in developed countries, particularly in Europe, has led to a large number of LUCE studies. Research being done in developing countries that are most affected by climate change is also outstanding.Originality/valueThe results collected will assist scientific researchers to better understand the research status and frontier trends in this sector, thus permitting researchers to comprehend current research interests in the LUCE analysis field and providing useful information for further investigation and publication strategies.

COVID-19 will not disrupt climate activism in Europe

2021 ◽  
Keyword(s):  
Climate Change ◽  
Economic Impact ◽  
Climate Policy ◽  
Financial Institutions ◽  
Green Party ◽  
Content Type ◽  
The Social ◽  
Electoral Performance ◽  
The Eu

Significance Activists have pressed for involvement in policymaking via citizen assembilies and have stepped up their campaign against European governments and financial institutions which they regard as favouring carbon-intensive industries. Impacts Activists will be concerned by rising emissions that accompany higher consumption once lockdown restrictions are lifted. The social and economic impact of COVID-19 may reduce voter interest and engagement in climate change. A strong electoral performance by Germany’s Green Party would boost support for ambitious fiscal and climate policy at the EU-level.

Coal trends signal deep shifts in China's economy

2016 ◽  
Keyword(s):  
Climate Change ◽  
Co2 Emissions ◽  
Turning Point ◽  
Coal Production ◽  
Sharp Reduction ◽  
Content Type ◽  
Production And Consumption ◽  
Combat Climate Change ◽  
China’S Economy

Subject Trends in China's coal use. Significance The last two years have seen a decline in China's domestic coal production and consumption, and a sharp reduction in coal imports. The country's coal sector has reached a turning point. Impacts Coal exporters such as Indonesia and Australia will suffer as China's demand for imported coal weakens. In large part due to China, global coal demand will probably flatline or fall slightly over the next five years. During the same period, global coal prices will remain under pressure, despite rapidly rising demand from India and Indonesia. New data imply China's CO2 emissions are higher than previously thought, making it more urgent to reduce coal use to combat climate change.

Determinants of climate change disclosures in the Turkish banking industry

2019 ◽  
Vol 37 (3) ◽  
pp. 901-926 ◽  
Author(s):  
Merve Kılıç ◽  
Cemil Kuzey
Keyword(s):  
Climate Change ◽  
Regression Analysis ◽  
Financial Institutions ◽  
Banking Sector ◽  
Banking Industry ◽  
Public Awareness ◽  
Developed Countries ◽  
Business Practices ◽  
Content Type ◽  
Reporting Practices

PurposeThe purpose of this paper is to investigate the extent of voluntary climate change disclosures in the Turkish banking industry and explore the factors explaining the extent of such disclosures.Design/methodology/approachThe research sample is based upon 24 banks that had been continuously operating in Turkey over the seven-year period from 2010 to 2016. The study uses a disclosure index to investigate the extent of voluntary climate change-related disclosures made in their annual and sustainability reports by banks. The study also investigates factors impacting the extent of disclosures by using multiple regression and fractional regression analysis.FindingsThe findings of the research reveal that while the number of banks providing voluntary information on their climate change-related practices substantially increased from 2010 to 2016, there remains a significant number of banks that have not incorporated climate change-related issues into their lending policies or corporate strategies. Further, with regard to the regression analysis, the study documents the significant and positive impacts of bank size, profitability, bank age and listing status upon the extent of the climate change disclosures, in line with political cost and legitimacy theory.Practical implicationsThe banking sector crucially impacts climate change indirectly, since banks provide financial backing to companies operating in environmentally sensitive industries. This paper presents empirical evidence of the factors impacting the extent of climate change disclosures by these banks, which might then be referred to by regulatory bodies when developing policies to promote environmentally responsible business practices within the banking industry.Social implicationsSeveral parties, which include governments, companies, financial institutions and non-governmental organizations (NGOs) must work together to fight climate change. In this sense, the NGOs and green activists have a crucial role in raising public awareness about climate change, which might then inspire financial institutions to incorporate climate change-related issues into their policies, operations and strategies.Originality/valueThe study extends the prior literature in two ways. This study has concentrated on environmental reporting practices in the banking sector which have been investigated in very few prior studies. Since prior research has focused on developed countries, this paper adds to the current literature by examining the environmental disclosure practices of commercial banks operating in Turkey, which is a rapidly developing country.

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