Climate Stress Scenarios and Stress Tests

Climate Stress Scenarios and Stress Tests

Robert Engle

Nobel Prize winning economist

In the final video collaboration with MMF, Nobel Laureate and economist Robert Engle discusses using climate portfolios to stress test banks and prepare for future damage.

In the final video collaboration with MMF, Nobel Laureate and economist Robert Engle discusses using climate portfolios to stress test banks and prepare for future damage.

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Climate Stress Scenarios and Stress Tests

11 mins 26 secs

Overview

Robert Engle rounds off by discussing how we can use climate factors portfolios as a way to stress test central banks by calculating the beta dynamically and then calculating capital shortfall. Robert then shows that by examining the gas and oil loans of banks against the climate beta, there is a positive correlation, suggesting that the betas are actually picking up something in their portfolio.

Key learning objectives:

  • Understand how to use climate portfolios to stress test banks

  • Learn how much climate damage you can prepare for

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Summary
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Expert
Robert Engle

Robert Engle

Robert Engle is a co-director of the Volatility and Risk Institute. He was awarded the 2003 Nobel Prize in Economic Sciences for his work on autoregressive conditional heteroskedasticity. He holds a Ph.D. in economics from Cornell University in New York, United States.

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