Bank for International Settlements & Singapore MAS Develop Climate Risk Platform Blueprint for Financial Authorities, Project Viridis Blueprint to Identify, Monitor & Manage Climate Risks in the Financial System, Project Viridis Was Announced in 2022 January
19th June 2024 | Hong Kong
The Bank for International Settlements (BIS) and the Monetary Authority of Singapore (MAS) have developed a climate risk platform blueprint for financial authorities, with Project Viridis providing a blueprint for financial authorities to identify, monitor & manage climate risks in the financial system. Project Viridis was first announced in 2022 January. Singapore MAS (12/6/24): “The Bank for International Settlements (BIS) and the Monetary Authority of Singapore (MAS) have developed a blueprint for a platform that integrates regulatory and climate data to help financial authorities identify, monitor and manage climate risks in the financial system. Integrating climate risk analysis into financial stability surveillance is challenging due to the complex nature of climate change, notable data gaps and limited understanding of how to measure the associated risks. To help tackle this challenge, a blueprint of a climate risk platform has been developed at the BIS Innovation Hub Centre in Singapore through Project Viridis. The blueprint lays out the key features and metrics required for a climate risk platform. These incorporate data and information on financed emissions, physical risk exposure and forward-looking assessments under different climate scenarios. Project Viridis demonstrates how regulatory data can be integrated with climate data, which are extracted from corporate disclosure documents using natural language processing techniques. This provides authorities with insights into climate-related financial risks, helping them form an initial view of financial institutions’ risk exposures, and to identify areas that may require deeper risk assessment.”
- More information on the platform can be found in the Project Viridis final report published here .
- Project Viridis was first announced during BIS Innovation Hub’s workplan in January 2022. For more information, please refer to this link .
- As its foundational architecture, the Viridis platform uses the Ellipse Data and Knowledge Platform (EDKP), which was developed by the BIS Innovation Hub Singapore Centre and MAS under Project Ellipse .
- The EDKP enables the integration of structured and unstructured data from various sources, and is being collaboratively enhanced by more than 15 central banks and financial regulators around the world. More information on EDKP can be found here.
“ Bank for International Settlements & Singapore MAS Develop Climate Risk Platform Blueprint for Financial Authorities, Project Viridis Blueprint to Identify, Monitor & Manage Climate Risks in the Financial System, Project Viridis Was Announced in 2022 January “
Maha El Dimachki, Head of the BIS Innovation Hub Singapore Centre: “As the impact of climate change on the global financial landscape intensifies, the need for adaptive and forward-thinking strategies has never been more urgent. Project Viridis helps equip financial authorities with the insights needed to integrate emerging climate risks into their analysis – and thereby help promote global financial stability.”
Celine Sia, Assistant Managing Director (Economics & Knowledge Management), Monetary Authority of Singapore (MAS): “Project Viridis is an innovative, collaborative blueprint that leverages technology solutions to systematically track climate-related data and metrices, thereby augmenting regulators’ efforts in assessing physical and transition climate risk exposures of individual banks and the financial system. This project addresses a common need of global financial authorities, and we look forward to further collaboration to expand such toolkits.”
Project Viridis – Central banks and financial authorities around the world recognise that both the physical effects of climate change and the transition to a low-carbon economy are sources of financial risks. In recent years, there has been a growing international call for financial authorities to monitor, manage and mitigate risks arising from climate change and to ensure climate-sensitive regulatory oversight of their supervised financial institutions. This is because of the strong impact that supervision has on the financial sector, which in turn plays a significant role in the transmission and sustainability of the firms that banks lend to. However, monitoring and analysing climate-related financial risks are particularly challenging because of the complex nature of climate change, its global impact, and the varying mitigation strategies across jurisdictions. Data and climate-related disclosures used to analyse climate risk also vary widely, meaning they are hard to compare in a consistent way.
In response to these challenges, the Bank for International Settlements Innovation Hub, together with the Monetary Authority of Singapore, launched Project Viridis to explore the development of a climate risk platform that could help central banks and authorities identify and assess material climate-related financial risks. Project Viridis is built on the premise 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. As a modular platform, further advancements and international alignment on climate data and metrics could then be integrated into the platform, providing richer insights. The Viridis climate risk platform prototyped the development of several features. These include:
- banking and financial system-wide and financial institution-level views of financed emissions,
- consolidation of reported and modelled emissions of entities that are key counterparties to financial institutions, and
- 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.
This report outlines a solution design for future platform functionalities, as and when more data become available, and methodologies established. It also shows how, over time, the conversations, standards, technologies and methodologies will most certainly evolve and how the platform too must evolve. During this process, the blueprint could form the basis for supervisors to understand their data gaps and explore with the supervised banks how to collect such data.
Bank for International Settlements & Singapore MAS Develop Climate Risk Platform Blueprint for Financial Authorities, Project Viridis Blueprint to Identify, Monitor & Manage Climate Risks in the Financial System, Project Viridis Was Announced in 2022 January
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