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Central Banking and Climate-Related Financial Risks

December 11 - 13
CEMLA Mexico City, Mexico


The course was organized by CEMLA, UNEP-FI, EUROCLIMA and the Florence School of Banking and Finance and was held person format in the city of Mexico City, Mexico on December 11-13, 2023. The total attendees were 33 representatives from 13 institutions and associates of CEMLA, representing 12 Latin-American countries.

The training course familiarized participants with the definition of climate-related risks and their interlinkages with financial risks as traditionally intended. Also explored the impact of climate change on assets’ price and value (and subsequently on banks’ balance sheets) as well as on the broader macroeconomic context. At the same time, the course highlighted the challenges of quantifying these risks and potential approaches to do so. And it touched the recently designed and applied tools, such as stress testing and scenario analysis. By drawing from authoritative examples and illustrations from various jurisdictions globally, it prompted participants to critically reflect on ways to rethink central banks’ analytical tools to tackle the risks and financial stability implications arising from climate change.

The sessions covered a snapshot of Climate-Related Financial Risks and deep-dive into selected tools to approach climate risks, like Climate stress testing at policy institutions, the systemic implications of climate-related risks and possible policy options: risk buffers, leverage ratios, countercyclical capital buffers held by Irene Monasterolo from the Utrecht University’s School of Economics and Katarzyna Budnik from the Stress Test Modelling Division at the European Central Bank. Also, the participants had the opportunity to learned about embedding climate goals within central banks’ mandates: ‘primary’ v. ‘secondary’ objectives, monetary and non-monetary policy tasks, session held by Agnieszka Smoleńska assistant professor at the Institute of Law Studies of the Polish Academy of Sciences. And in last instance they had an overview and comparison of sustainable finance instruments (green, social, and sustainability-linked bonds and loans, securitization), by Federica Agostini who is a Research Associate at the Florence School of Banking and Finance

Federica Agostini

Federica Agostini is a Research Associate at the Florence School of Banking and Finance. She is also in the final stages of completing her PhD at the University of Glasgow School of Law, where her doctoral research investigates the role of law in supporting sustainability objectives through financial transactions, notably securitisations. Federica also holds a Master of Laws in Corporate and Financial Law (with dis- tinction) from the University of Glasgow as well as a combined Bachelor and Master Degree in Law (cum laude), with specialisation in EU and comparative law, from the University of Trento.

Before joining the EUI, Federica has served as a Research and Teaching Associate at the University of Glasgow, actively participating in research projects on the intersection between law and sustainable finance. She has also worked at the Italian National Central Bank and acted as a consultant for the European Bank for Reconstruction and Development on the design of policy products to advance green finance. As part of her role at the EUI, Federica contributes to several teaching and training activities in the area of sustainable finance, climate risks and green bonds, including in the con- text of the partnership with the European Central Bank. Her research focusses on the nexus between law, financial markets and sustainability goals, corporate governance as well as EU financial regulation. 

Katarzyna Budnik

Katarzyna Budnik is currently an Adviser in the Stress Test Modelling Division at the European Central Bank. She is responsible for macroprudential stress test and policy assessment. She joined the European Central Bank in 2010 and has worked in different areas of Financial Stability and Economics. Prior to moving to the European Central Bank she was heading the Forecasting Division at the National Bank of Poland. She received her PhD degree (Econ) with honors from the Warsaw School of Economics. Her research interests include macroprudential and monetary policies, banking, macroeconomic modelling and labour markets.

Irene Monasterolo

Irene Monasterolo is Professor of Climate Finance at Utrecht University’s School of Economics, and has a PhD in Economics and Statistics from the University of Bologna (IT).

Irene’s research contributes to analyse the role of finance in climate change mitigation and adaptation. To this aim, Irene developed new metrics and methods to assess the macro-financial criticality of climate risks, which have been published in top journals including Science and Nature Climate Change, and applied by financial decision makers. In 2017 Irene published the climate stress test of the financial system that introduced the first framework to translate climate scenarios into adjustment in financial valuatio n and risk metrics for investors. The climate stress test includes the Climate Policy Relevant Sectors (CPRS), a science-based classification of activities’ exposure to transition risk applied by several financial supervisors. Irene has also co-developed the EIRIN Stock-Flow Consistent macro-financial model to analyse the impacts of climate physical and transition risks in the economy and finance, and of green finance policies (e.g. monetary, macroprudential, etc.) on the low-carbon transition. EIRIN has been applied by the World Bank to assess compound climate and pandemics risks, and by the European Central Bank (ECB) to assess the double materiality of climate risks in the euro area. Irene has collaborated with leading financial institutions, including the World Bank, the ECB, the European Insurance and Occupational and Pension Authority, the European Banking Authority, the Monetary Authority of Singapore, the European Stability Mechanism on climate financial risk disclosure and risk assessment. Irene is associate editor at Ecological Economics, and fellow at the Institute Louis Bachelier and at SUERF.

Agnieszka Smoleńska

Dr Agnieszka Smoleńska is an assistant professor at the Institute of Law Studies of the Polish Academy of Sciences, where she leads a three-year NCN grant-funded research project “The EU’s sustainability capitalism: identifying the varieties of financial markets transition”. She is part of numerous international research networks on green finance, including the EBI’s Working Group on Finance, Climate Change and Sustainability. Dr Smoleńska has over 12 years of professional experience in EU and international policy, including at the European Parliament, European Commission, the Florence School of Banking and Regulation (FBF) and as the head of the European desk of the analytical centre Polityka Insight. Her research interest span EU economic governance, banking regulation and sustainability transformation.