In testimony before the Senate Banking Committee, Federal Reserve Board Chairman Powell confirmed that climate stress scenarios will be an “important priority” and a ”key tool” for the agency going forward. In addition, he drew a distinction between stress testing, which examines capital adequacy, and scenario analysis, which he described as a risk management tool to help financial institutions understand the risks in their business models posed by climate change over time.
Climate scenario analysis
Stress testing is distinct from scenario analysis
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Climate scenario analysis
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Principal, U.S. Regulatory Insights & Compliance Transformation Lead, KPMG LLP