The E-axes Forum on Climate Change, Macroeconomics, and Finance

Laura Parisi

“ECB economy-wide climate stress-test”

Event description

In September 2021, the European Central Bank made a great leap in its climate-related supervisory activities. It published the results and methodologies of its first economy-wide climate stress test. Laura Parisi, team lead at the new Climate Change Centre at the ECB will present both at this upcoming webinar. From the abstract:

“This stress test comprises three main pillars: (i) climate-specific scenarios to project climate and macroeconomic conditions over the next 30 years; (ii) a comprehensive dataset that combines climate and financial information for millions of companies worldwide and approximately 1,600
consolidated euro area banks; (iii) a novel set of climate-specific models to capture the direct and indirect transmission channels of climate risk drivers for firms and banks.

The results show that there are clear benefits to acting early: the short-term costs of the transition pale in comparison to the costs of unfettered climate change in the medium to long term. Additionally, the early adoption of policies to drive the transition to a zero-carbon economy also brings benefits in terms of investing in and rolling out more efficient technologies. […] Climate change thus represents a major source of systemic risk, particularly for banks with portfolios concentrated in certain economic sectors and specific geographical areas.

Moderator:

Pierre Monnin
Senior Fellow, CEP

Laura Parisi

Laura Parisi is Team Lead in the newly established Climate Change Centre of the European Central Bank, that operates directly under the supervision of President Lagarde. Since more than two years her areas of research focus primarily on the impact assessment of climate-related risks for the banking sector and the overall economy: she’s leading the ECB team working on climate-risk stress-testing, and she also collaborates with European and international institutions, and standard setting bodies. She previously worked in the Stress Test Modelling and in the Financial Regulation and Policy division in the Directorate General Macroprudential Policy and Financial Stability, where she mainly focussed on risk modelling for the banking sector. Laura holds a bachelor degree in Physics and a master degree in Theoretical Physics, and a PhD in Economics and Management from the University of Pavia.

Paper and slides

“ECB economy-wide climate stress test” (Paper)

“ECB economy-wide climate stress test” (Slides)

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