The Monetary Authority of Singapore (MAS) and the Bank for International Settlements (BIS) have together developed a blueprint for a platform that can integrate regulatory and climate data to help financial authorities identify, monitor and manage climate risks in the financial system.
Due to the complex nature of climate change, data gaps and limited understanding of measuring associated risks, it is difficult to integrate climate risk analysis into financial stability surveillance. The BIS Innovation Hub Centre has prepared the blueprint through Project Viridis to address these challenges.
The blueprint outlines the key features and metrics required for a climate risk platform. These incorporate data and information on financed emissions, physical risk exposure and forward-looking assessments under different climate scenarios.
Project Viridis demonstrates how regulatory data can be integrated with climate data extracted from corporate disclosure documents using natural language processing techniques. This provides authorities with insights into climate-related financial risks, helping them form an initial view of financial institutions’ risk exposures, and to identify areas that may require deeper risk assessment.
“As the impact of climate change on the global financial landscape intensifies, the need for adaptive and forward-thinking strategies has never been more urgent. Project Viridis helps equip financial authorities with the insights needed to integrate emerging climate risks into their analysis – and thereby help promote global financial stability,” said Maha El Dimachki, Head of the BIS Innovation Hub Singapore Centre.
“Project Viridis is an innovative, collaborative blueprint that leverages technology solutions to systematically track climate-related data and metrics, thereby augmenting regulators’ efforts in assessing physical and transition climate risk exposures of individual banks and the financial system. This project addresses a common need of global financial authorities, and we look forward to further collaboration to expand such toolkits,” said Celine Sia, Assistant Managing Director (Economics & Knowledge Management), MAS.
