Objectives On completion of this tutorial, you will be able to:

• Recognize the need for climate stress testing and the linkages/differences between scenario analysis and stress testing
• Identify the key components of a climate stress test
• Recognize why the incorporation of climate-related risks into stress testing poses particular challenges
• List the reasons why central banks/regulators conduct climate stress tests and the conclusions from some of these tests

Tutorial Overview Climate change is one of the greatest challenges facing the world today. Climate risks, however, are particularly difficult to assess because of their unpredictability and interconnectedness with other systems. It is unclear how, and to what degree, climate-related changes impact other socioeconomic systems and financial markets. Stress tests are a tool used to help understand and quantify the financial impact of climate risk under various scenarios. This tutorial describes the concept of climate stress testing in detail. Prerequisite Knowledge Climate Risk - An Introduction Tutorial Level: Intermediate Tutorial Duration: 55 minutes