Are climate change stress tests for banks on the horizon?

Climate stress tests for banks are in their infancy, but initial results offer some good news. Studies conducted by the European Central Bank and Bank of England indicate that future potential losses from climate change appear to be manageable and, for now, don’t have implications for banking capital requirements. While investors should gain some comfort from the fact that projected losses can be absorbed, it was also recognised that losses are likely to be underestimated for four reasons, says abrdn.