Federal Reserve Bank of New York Executive Vice President Kevin Stiroh described the complexity of climate change risk and the challenges facing climate change risk managers.
At the Global Association of Risk Professionals 2020 Climate Risk Symposium, Mr. Stiroh stated that understanding climate change risk is complex because of the many interconnections and feedback loops, the likelihood of non-linearities and tipping points, and "massive" uncertainty about the timing of climate impacts. Mr. Stiroh stated that the implementation of climate change risk management is a complicated problem because success depends on analyzing granular data across sectors, implementing new governance, and investing in new expertise in the workforce.
Mr. Stiroh warned that success in managing climate change risks cannot be satisfied by taking a "cautious approach."
As Co-Chair of the Basel Committee's Task Force on Climate-Related Financial Risk ("TFCR"), Mr. Stiroh reported that the TFCR first-phase work on existing regulatory and supervisory initiatives is complete and that the TFCR will now turn its focus to understanding climate risk transmission channels.
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