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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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Featured Pathways

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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Ready to get started?

Plans & Membership

Our Platform

Expert led content

+1,000 expert presented, on-demand video modules

Learning analytics

Keep track of learning progress with our comprehensive data

Interactive learning

Engage with our video hotspots and knowledge check-ins

Testing & certification

Gain CPD / CPE credits and professional certification

Managed learning

Build, scale and manage your organisation’s learning

Integrations

Connect Finance Unlocked to your current platform

Featured Content

More featured content

Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

More featured content

Book a demo

Pricing

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Climate Risk Management II

Climate Risk Management II

Simon Thompson

Chartered Banker Institute CEO & ESG specialist

In this second video on climate risk management, Simon Thompson explains the concept of stranded asset risk and its impact on financial markets. He also covers the challenges faced in quantifying climate-related risks and how scenario analysis and stress testing can be used to assess the resilience of financial institutions.

In this second video on climate risk management, Simon Thompson explains the concept of stranded asset risk and its impact on financial markets. He also covers the challenges faced in quantifying climate-related risks and how scenario analysis and stress testing can be used to assess the resilience of financial institutions.

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Climate Risk Management II

7 mins 14 secs

Overview

Climate change presents substantial risks to financial markets, urging thorough risk assessments. The Task Force on Climate-related Financial Disclosures (TCFD) offers tools to tackle these risks. Stranded assets, like fossil fuels devalued by a swift shift to low-carbon alternatives, could destabilise financial sectors. Central banks, regulators, and the TCFD endorse climate risk management, encouraging organisations to employ scenario analysis and stress testing for resilience. The move to a low-carbon economy simultaneously reduces physical risks while amplifying transition risks, necessitating effective climate risk management in daily operations.

Key learning objectives:

  • Understand the concept of stranded asset risk and its potential impact on financial markets

  • Understand the challenge of understanding and quantifying climate-related risks

  • Outline how scenario analysis and stress testing can be used for assessing the resilience of financial institutions and mitigating climate-related risks

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Summary

What is stranded asset risk and what does it mean for the financial industry?

Stranded asset risk refers to the significant or total loss of economic value an asset suffers due to an abrupt transition to a low-carbon world. This risk is particularly significant for fossil fuel assets which may become unviable due to global warming limitations outlined in the Paris Agreement. The potential losses from stranded assets are so extensive that they pose a systemic threat to financial stability, affecting financial firms, retail investors, and various sectors dependent on fossil fuels.


Why is it difficult to understand and quantify climate-related risks?

Understanding and quantifying climate-related risks is challenging due to their complex and interrelated nature. Variables such as the degree of global warming, the speed of transition, changing regulations, and potential legal liabilities contribute to this complexity. Additionally, these variables are interconnected, resulting in intricate feedback loops. Scenario analysis and stress testing are recommended to help understand the impact of different climate change assumptions.


How can scenario analysis and stress testing help quantify the nature of climate risks?

Scenario analysis and stress testing are vital tools in quantifying climate risks. Scenario analysis allows organisations to understand the potential impacts of various climate change assumptions on their operations. By analysing different global warming scenarios (extreme, intermediate, best-case), they can assess the resilience of their financial portfolios and identify vulnerabilities. Stress testing, often using scenarios from the Network for Greening the Financial System (NGFS), assesses the resilience of financial institutions' balance sheets to significant shocks. This can reveal areas of risk and prompt proactive steps for long-term stability and climate risk alignment.

 

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Simon Thompson

Simon Thompson

Simon is the Chief Executive of the Chartered Banker Institute and co-author of Green Finance: Principles and Practice. He is also a former Vice President of the European Bank Training Network, and is currently Chair of the Global Banking Education Standards Committee. He specialises in professional ethics, and green and sustainable finance.

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