Experts from relevant government departments, industry associations, financial institutions and academic institutions discussed the methods, applications and challenges related to environmental and climate risk assessment and stress testing. The seminar was held in hybrid form. Julia Mao, the director of the International Cooperation of IIGF, presided over the seminar.
Jieqing Zhang, the Chief Representative of the Beijing office and Country Director of the China Program of NDRC, delivered an opening speech for the meeting.
Director Jieqing Zhang expressed her gratitude to all the experts participating in the seminar.. She pointed out that addressing climate change is a global issue, and financial institutions will play an important role in it. Therefore, it is particularly important for financial institutions to deepen their understanding of the physical and transitional risks brought about by climate change, strengthen their assessment of environmental and climate risks, improve their ability to cope with climate change and guide capital flows to climate-friendly areas. The project aims to provide guidance and reference for stakeholders to improve their risk management and risk resilience capacities. Director Zhang hoped that the experts participating in the seminar could put forward opinions and suggestions on the research results of the project, promote the implementation of relevant results and jointly explore new paths for green transformation and development.
The second-level inspector of the Policy Research Bureau of the China Banking and Insurance Regulatory Commission (CBIRC) gave a keynote speech at the meeting. He said that finance has always played a key role in pushing social change and urban development. Since the 17th National Congress of the Chinese Communist Party first proposed building an ecological civilization, promoting the mainstreaming of green finance has become an inevitable direction for the development of social civilization. The competitiveness, adaptability and inclusiveness of green finance will be more helpful to serve the real economy and promote its high-quality development. He suggested that financial institutions and enterprises should first improve their self-awareness and strengthen their environmental and climate risk management capabilities; regulatory authorities and financial institutions can actively carry out international cooperation in environmental and climate risk assessment, jointly develop and innovate environmental stress testing methodologies and promote the formation of internationally recognized environmental and climate risk management standards. He affirmed the research topic of this project and hoped that this research could promote the innovation of relevant financial tools and methodologies, and it would be helpful for environmental and climate risk management in the future.
Jie Bao, a researcher at IIGF and the Institute of Green Investment, presented the research results of this project. Based on all the research and analyses, this report proposes six recommendations: （1） gradually improve the methodology of environmental stress testing of financial institutions; （2） improve the construction of functional institutions and promote market research and publicity;（3） jointly promote the standardization of environmental and climate risk assessment systems;（4） develop diversified financial tools to alleviate the pressure of environmental and climate risks; （5） combine the credit mechanism to guide capital to facilitate sustainable transformation; （6） improve the level of carbon energy efficiency and technological innovation and accelerate the realization of carbon peaking and carbon neutrality goals.
In the roundtable discussion session of the seminar, Hong Yin, vice president of the Modern Finance Research Institute of the Industrial and Commercial Bank of China, Yaqin Chen, assistant general manager of the Green Finance Department of the Industrial Bank, Shanning Dong, deputy general manager of the Green Finance Department (first-level department of the Head Office) of the Bank of Jiangsu, Zhenfu He, director of the Investment Relations Division of the China Energy Investment Office of the Board of Directors, Weidong Zhang, director of the Reform Division of the China Electricity Council Department of Industrial Planning, Environment and Resource, and Tianyin Sun, deputy director of the Center for Green Finance Research of Tsinghua University, had in-depth discussions on the methods, applications and challenges for financial institutions and enterprises to practice “environmental and climate risk assessment and stress testing” and how to improve their risk management paths and risk resilience, etc. Qi Wu, director of the Environmental Laws and Governance Program of NRDC, moderated the roundtable discussion.
During the roundtable discussion, experts put forward their opinions and suggestions based on their professional experience. Hong Yin said that financial institutions need to incorporate climate and environmental factors into the risk management process and continue to promote data collection, modeling methods and results application of environmental stress tests, etc. to continuously improve their environmental and climate risk management capabilities; Yaqin Chen noted that financial institutions should actively carry out environmental and climate stress tests, which will release positive signals and policy preferences for green investment in the market, increase the attention of enterprises and investors to green finance and push the market to expand investment in low-carbon transformation projects; Shanning Dong pointed out that for banks to carry out environmental stress tests, it is necessary to overcome difficulties such as the large number of subjective coefficients in the test, which may easily lead to uncertainty, and excessive reliance on corporate financial indicators for stress testing, which affects the internal rating of the company. Commercial banks need to use the carbon peaking and carbon neutrality top-level policy as a benchmark and set up test method application plans according to different scenarios; Zhenfu He proposed to ensure energy security, develop scientific and technological innovation to promote clean energy alternatives, vigorously develop energy Internet platforms and expand energy reserves and carbon sinks for energy companies to carry out low-carbon transformation; Weidong Zhang pointed out that the launch of the national carbon market has set higher requirements for the transformation of the traditional energy and power industries. Therefore, we need to fully grasp the policy and data basis when setting the application scenarios for the environmental stress test methodology. It shows that changes in carbon quotas and carbon prices will have a long-term operational impact on the electrical power industry; Tianyin Sun suggested that in order to promote the future development of China’s environmental and climate risk assessment, the government needs to release strong regulatory signals to promote the coordination and unification of environmental and climate risk standards, and financial institutions should be equipped with human and financial resources for environmental risk management to promote the mainstreaming of market awareness. Think tanks and research institutions should continue to pay attention to the latest progress in the research of global environmental stress testing methodology and actively explore independent innovation.
Professor Yao Wang, director general of IIGF, pointed out in her concluding remarks that in the context of carbon peaking and carbon neutrality, and with the growth of environmental protection threshold and the increasing demand for low-carbon transformation, environmental risks will be further transmitted from the enterprise side to the financial side. Therefore, it is imperative to improve the application and innovation of environmental and climate risk assessment and stress testing methodologies. She commented that in the development of environmental and climate risk assessment, the quantitative basis and empirical basis are equally important, and improving the substantive application of risk management will be the key. In the future, (1) regulatory authorities and commercial banks can jointly carry out local pilot projects to gradually promote the environmental and climate risk supervision system; (2) think tanks and research institutions need to continuously promote application practices and research summaries and constantly optimize the application scope of environmental stress testing methodologies; (3) all participants should pay attention to promoting the establishment of databases related to environmental and climate risks and the training of professional talents, so as to help the overall improvement of environmental and climate risk management capabilities.
