Stress-Testing The Impact Of Climate Change On Canada's Financial System

The Bank of Canada (BOC) and the Office of the Superintendent of Financial Institutions (OSFI) and a small group of volunteer financial institutions will conduct a pilot project to evaluate the possible effects of climate change and the transition to a low-carbon economy on Canada's financial system and institutions. The project will use scenario analysis to stress test participating financial institutions to evaluate their exposure to the risks of climate change and the transition to a low-carbon economy.

What you need to know

• The pilot project will be a key step in tailoring existing climate change scenario analysis models to the Canadian context where transition risks loom especially large due to the size of the resource sectors relative to the economy as a whole. These "Canadianized" models may provide a standardized means for financial institutions, investors, and regulators to assess the exposure of Canada's financial institutions to