BIS-MAS develop blueprint for climate risk platform

The Bank for International Settlements (BIS) and the Monetary Authority of Singapore (MAS) have developed a blueprint for a platform to integrate regulatory and climate data under Project Viridis. The climate data is extracted from corporate disclosure documents using the natural language processing techniques. This platform is aimed to help financial authorities to identify, monitor, and manage climate risks in the financial system. It would help address challenges related to the complex nature of climate change and the resulting data gaps and varying risk mitigation strategies across jurisdictions.

BIS also published a report that outlines the solution design for future platform functionalities, as and when more data become available and methodologies are established. The report addresses how the platform must evolve with the changes in the related standards, technologies, and methodologies over time. Nevertheless, the blueprint could form the basis for supervisors to understand their data gaps and explore with the supervised banks how to collect such data. The premise behind the platform is that insights on climate risks could be drawn initially from existing available data sources. These insights could provide supervisors with an early understanding of which entities could be more exposed to climate-related financial risks and any potential systemic exposure to sectors and geographies.

The report explains that the blueprint for climate risk platform is split into five main categories covering transition risks, physical risks, asset and economic data, systemic macro views, and essential user capabilities. The covered transition risk metrics include portfolio sector composition; Scope 1, 2 and 3 financed emissions (absolute and intensity numbers); portfolio, sector, and company alignment with transition pathways; carbon pricing impacts; and assessment of transition plans. Physical risk metrics include hazard exposure, sector sensitivities to physical hazards, adaptive capacity and adaptation plans, insurance coverage, and physical versus transition risk matrix. Essential user capabilities include interactive and explorable map view and benchmark data, standard guidance on weighting multiple data sets, and ability to export data. The climate risk platform prototyped the development of several features, including:

• banking and financial system-wide and financial institution-level views of financed emissions,

• consolidation of reported and modeled emissions of entities that are key counterparties to financial institutions

• mapping the geographical distribution of entities' assets to assess the entities' transition risk exposure arising from changes in carbon pricing policies and exposure to different physical hazards

The platform uses the Ellipse Data and Knowledge Platform (EDKP) as its foundational architecture. The EDKP was developed by the BIS Innovation Hub Singapore Center and the MAS under Project Ellipse. The EDKP enables the integration of structured and unstructured data from various sources and is being loaded with fresh data from over 15 central banks and financial regulators worldwide. Project Viridis will be a module added onto the EDKP and made available to EDKP community members. Thus, the blueprint for the climate risk platform described in the BIS report represents the starting point and can serve as a foundation for ongoing intensive and extensive development. The report notes that collaborating on common solutions that can future-proof the data and analytical capabilities of supervisors is one way of taking small but coordinated steps toward logical science-based goals.

Related Links

• Press Release

• Report (PDF)