Financial regulatory guidelines for climate risk management and related analytical tools

This chapter examines financial regulatory guidelines for climate risk management and related analytical tools across global, industrialized, and newly industrialized economies. It compares approaches in the UK, US, Japan, Malaysia, Singapore, and Hong Kong, highlighting differences in regulatory frameworks. The chapter also presents a practical example of applying stress-testing principles to a residential mortgage portfolio, demonstrating how climate risks can be incorporated into financial risk assessments. This includes analyzing the impact of extreme weather events on loan-to-value ratios, probability of default, and loss given default. The chapter underscores the growing importance of climate risk considerations in financial regulation and risk management practices worldwide, providing insights into emerging methodologies for quantifying and managing climate-related financial risks.