Central banks have begun integrating climate-related risks into their financial stability assessments, but estimating risks to the financial system more broadly remains a work in progress. This column summarises recent scenario-based analyses of the risks thatdecarbonisation poses to UK banks, insurers, and pension funds. Though no imminent threats to financial stability are observed, the authors believe an abrupt switch to an ambitious decarbonisation scenario could result in non-negligible losses, particularly in a ‘disorderly’ transition.
