OMFIF: central banks’ climate stress tests ‘need better data’

Researchers from the Official Monetary and Financial Institutions Forum (OMFIF), a think tank, argue that central banks have taken significant steps towards assessing the vulnerability of the financial sector to climate risk through stress tests. They cite the European Central Bank (ECB) and the Bank of England (BoE) as examples. OMFIF’s research highlights the variation in how stress testing is designed and implemented. BoE’s stress test, for instance, had a wider scope and included insurance companies, while the ECB focused on bottom-up approaches using qualitative data. However, there are methodological constraints with stress testing – data availability being the most significant. Christoffer Kok, head of the ECB’s stress test modelling division, highlighted the lack of data on Scope 3 emissions in an OMFIF podcast, and the BoE has identified data shortfalls more broadly as a challenge.