How to anticipate a Green Swan event

This report looks at climate transition risk as it relates to Chinese financial institutions and includes an in-depth review of methodologies used to understand climate risk in portfolios.

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Shanghai

This report outlines climate transition risk and its importance to Chinese financial institutions. It contains an in-depth review of current methodologies used by financial institutions and their partners to understand climate risk in their portfolios. It is intended as a capacity building tool for Chinese financial institutions to enable them to effectively identify which methodologies are most relevant to them. 

By internalising climate transition risks, financial institutions can future-proof their investments and shift them away from high risk assets to those less likely to be disrupted or stranded by climate change. This will encourage more focus on investments with low climate risk, which will inherently be ones that either directly or indirectly support the transition away from fossil fuels. The report focuses on China’s banks, which dominate the country’s financial market, providing three-fifths of total credit to the private sector.

The report is the output of a wider capacity building project on climate transition risk methodology, and was commissioned by the Central Banks and Supervisors Network for Greening the Financial System (NGFS) and Tsinghua University Research Center for Green Finance Development. It was also supported by the UK Partnering for Accelerated Climate Transition (UK PACT) - China Green Finance Programme, which aims to support the development of knowledge in the private finance sector to accelerate the transition to a net zero economy.

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