Interview

Maritu Legesse, honorary doctor artist, appeared on the Seifu show.

veteran performer Maritu Legese and her comforting daughter of 23 years. Part of figuring out how stable a bank is is figuring out how physical or transitional risks affect the economy and bank capital. Because physical threats are unique to a certain area, we need new ways to figure out where storms and floods might happen.

The study uses new information and estimates about the likelihood and effects of different risks on physical assets like buildings or infrastructure as well as economic activities, such as a drop in productivity due to high heat. This method was used in the 2021 Philippines FSAP to take typhoon risks to banks into account.

Policies that aim to move resources from brown industries to green industries in order to speed up the transition to a world with less carbon have an effect on the future of brown industries. We evaluate the effects of carbon taxes on certain economic sectors and, whenever possible, directly on enterprises’ balance sheets and, consequently, on banks in order to understand how this affects the financial sector.

We also think about what would happen if investors changed their minds about how much a company was worth because of how unexpected policy changes would affect long-term profits. A situation like this, which is often called a “climate Minsky moment,” could raise credit risk and affect bank capital right now. This was covered in this year’s United Kingdom FSAP, which looked at how quickly changing weather could affect how much a company is worth and, as a result, its credit risk.

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