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December 15, 2020

EIOPA publishes new climate risk sensitivity analysis with contributions from 2DII

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The initiative reflects growing interest by supervisors in how climate-related risks will affect the portfolio values of their regulated entities

Just after the fifth anniversary of the Paris Agreement, today the European Insurance and Occupational Pensions Authority (EIOPA) published a new sensitivity analysis of climate-change related transition risks in the investment portfolio of European insurers. Their report builds on 2° Investing Initiative’s PACTA methodology and the climate risk sensitivity scenarios developed by 2DII to quantify potential financial losses under a range of different circumstances. The scenarios use the concept of a delayed “Inevitable Policy Response” (IPR) and also include the Forecast Policy Scenario developed by the IPR consortium, convened by UN Principles for Responsible Investment.

Leveraging the results of 2DII’s analysis and other methods, notably the work of Battiston and Monasterolo on sovereign bonds, the report quantifies potential climate-change related transition risks to the European insurance sector.

Read the report here.

Supervisors’ growing focus on climate-related risks

EIOPA’s initiative comes as supervisors around the globe are growing increasingly concerned by climate-related risks, especially in the five years since the Paris Agreement. Yesterday, 2° Investing Initiative launched a new tool to help French financial institutions implement the climate exercise developed by the French Prudential Supervision and Resolution Authority / l’Autorité de contrôle prudentiel et de resolution (ACPR), which is due by the end of 2020. Other national supervisors, including the Bank of England, Dutch National Bank, Bank of Canada, and more, have also taken steps to incorporate climate-related risks into assessments of their regulated entities.

2DII has been proud to support these initiatives by providing expert research and analysis on climate-related financial risks. 2DII is currently working with 5 financial supervisory authorities and central banks across North and South America, Europe, and Asia on similar exercises, with results planned in 2021.  More about 2DII’s work with supervisors here.

About our funders:

This project has received funding from the European Union’s Life programme under LIFE Action grant No. LIFE19 GIC/DE/001294. The report reflects only the views of its funders.

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