Letter from European Commission on assessment of the financial system’s resilience to stress in the transition to the EU’s 2030 goals for the reduction of greenhouse gas emissions

Following the „Strategy for Financing the Transition to a Sustainable Economy“, the European Commission has requested an „Assessment of the financial system’s resilience to stress in the transition to the EU’s 2030 goals for the reduction of greenhouse gas emissions“.
This exercise will be conducted jointly by the European Supervisory Authorities (ESAs), the European Central Bank (ECB), and the European Systemic Risk Board (ESRB). The purpose of the analysis is to identify any potential vulnerabilities in the financial sector and to understand how stress in the financial system could affect the transition to the 2030 goals. The exercise will go beyond usual climate stress tests and will also look at contagion and second-round effects.
+ One scenario should concentrate on climate-change-related risks that might already manifest in the short term, most likely in the form of asset price corrections caused by a quick reassessment of transition or physical dangers.
+ A second scenario may integrate such climate-change-related dangers with other stress variables, to the greatest extent practicable compatible with scenarios for regular stress-testing exercises.
The analysis should be completed by Q1 2025, and the results will provide input into the work of the new Commission.