Federal regulators are warming to scenario analysis as an emerging tool to evaluate financial institutions’ vulnerability to climate risk, drawing criticism from at least one Senate Republican.
The Federal Deposit Insurance Corporation and the Federal Reserve are rallying behind scenario analysis, which involves examining the economic ramifications of hypothetical situations on companies and the market at large.
Martin J. Gruenberg, acting chairman of the FDIC, this week emphasized the agency’s support for the process in a speech on climate risk. Gruenberg said the FDIC’s mission to maintain stability and public confidence in the U.S. financial system includes considering climate change’s adverse impacts on the financial system.
