The Federal Reserve Board has announced that six of the U.S.’s biggest banks will take part in a new climate analysis exercise designed to improve the ability to manage climate-related financial risks.
The exercise, announced Thursday, will involve Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo, with the pilot exercise set to launch in early 2023.
In a September 29 press statement, the Federal Reserve said participating banks will be tasked with analyzing the impact of climate impact scenarios on “specific portfolios and business strategies,” which the board will review before engaging with the institutions in a bid to build their capacity to manage climate-related financial risks.
The central bank added that unlike its usual bank stress tests, the climate scenario analysis exercise is “exploratory in nature and does not have capital consequences.”
“By considering a range of possible future climate pathways and associated economic and financial developments, scenario analysis can assist firms and supervisors in understanding how climate-related financial risks may manifest and differ from historical experience,” the statement explained.
The exercise is expected to conclude at the end of 2023.