Recently, a task force has been established by the Financial Stability Board that addresses climate risks for the financial industry. The Task Force on Climate-related Financial Disclosures (TCFD) has published recommendations for standardized disclosure about climate-related risks, and it has proposed developing scenario analyses to address climate-related risks for the financial industry.

Using the climate risk indicators developed by the TCFD, an impact analysis that explored how direct impacts of the risk indicators influence one another was conducted. In addition, the influence of indirect impacts of the risk indicators on each other was examined by using a mathematical approach, the cross impact matrix-multiplication applied to classification (MICMAC Analysis).

Finally, three scenarios were generated (a business as usual scenario; a reduced climate policies scenario; and a strong climate policies scenario), from which recommendations were made that will enable the Canadian financial sector to address risks and take proactive action, including investing in a low-carbon economy, to mitigate climate change.

  • Olaf Weber is a CIGI senior fellow and an expert on sustainability and the banking sector. He is currently a professor in the School of Environment, Enterprise and Development at the University of Waterloo and a University of Waterloo Research Chair in Sustainable Finance.

  • Adeboye Oyegunle is a graduate research student currently undertaking his Ph.D. in sustainability management at the University of Waterloo. His research interest cuts across climate finance and environmental and social  governance integration into financial institutions’ portfolio and decision-making process.