Importance of finance sector analysis in transformation assessments

In recent years, the finance sector has discovered the risks of climate change and climate policy on financial assets and productivity. Especially central banks, organized in the Network for Greening the Financial System (NGFS) have been developing methods and standards for climate stress testing the financial sector. A consortium of IAM teams has worked with the NGFS to develop bespoke scenarios for stress testing the financial sector. On the other hand, the role of the financial sector in climate scenarios is rather limited, as pointed out in a recent Science paper. Therefore, scientists are working on methods to improve the representation of financial actors in climate scenarios.