# Planning to move to the low carbon economy: How Banks can plan today for new stress tests arriving soon Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2020-06-11 Category: BANKING Category URL: https://financedigest.com/category/banking Meta Title: BoE Postpones Climate Stress Tests: What It Means for Banks Meta Description: Discover the impact of Bank of England's delay in climate stress tests on financial firms. Prepare now for the future of a low carbon economy. URL: https://financedigest.com/planning-to-move-to-the-low-carbon-economy-how-banks-can-plan-today-for-new-stress-tests-arriving-soonhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fd070818-1-1737287566692-compressed.jpg) _By **James Gannaway,** Head of Financial Services & Insurance, Board International_ The Bank of England (BoE) is postponing its climate stress tests, which have been regarded as a ground-breaking initiative to enable in-depth analysis of the impact of global warming on the business models and operations of both banks and insurers. The bank’s Prudential Regulation Authority (PRA) and the Financial Policy committee in a statement on priorities in light of the impact of the current global lockdown, has said it will delay the launch of its climate biennial exploratory scenario, which will test the resiliency of the largest financial firms’ business models to the physical and transition risks from climate change, until at least mid-2021. [Central banks](https://www.financedigest.com/analysis-powerful-swiss-central-bank-faces-reform-calls-in-wake-of-credit-suisse-rescue.html "Analysis-Powerful Swiss central bank faces reform calls in wake of Credit Suisse rescue") around the world, have been involved in the debate over climate change and the impact on the financial system. The BoE has led the way to date in encouraging banks and [insurers](https://www.financedigest.com/different-countries-different-insurance-cultures-how-insurers-can-adapt-their-products.html "insurers"), to assess exposures to global warming and new risks which can come with the move towards a low-carbon economy. So what does this mean for Banks & Insurers, all of whom would have been making boardroom level plans for the impending [stress tests](https://www.financedigest.com/demystifying-us-feds-approach-on-systemic-climate-risk-stress-testing.html "Demystifying US Fed’s approach on Systemic Climate Risk Stress Testing")? Firstly, a short postponement of the Bank’s stress tests, is completely understandable, given the realignment of [central banks](https://www.financedigest.com/central-banks-start-turning-off-the-cash-taps-2.html "Central banks start turning off the cash taps") all over the world to refocus financial policies, and double-down on help to try to manage the economic fall out of the current lockdown. But – secondly, and just as importantly, the climate emergency is not going away, and will return to the top of the BoE’s agenda very soon, meaning vital plans at Banks & Insurers, must continue to be made. **[Low carbon](https://www.financedigest.com/low-carbon-bitcoin-crypto-miners-green-power-talk-angers-texas-locals.html "Low-carbon bitcoin? Crypto miners’ green power talk angers Texas locals") economy will feature heavily in boardroom plans** ![James Gannaway](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/james-gannaway-450x300-1737287566662-compressed.jpg) James Gannaway Right now there are many commentators talking about a new normal,McKinsey go one [step further frequently referring to a next](https://www.financedigest.com/eu-leaders-to-discuss-next-steps-on-energy-ukraine.html "EU leaders to discuss next steps on energy, Ukraine") normal. The climate emergency and the transition to the low carbon economy will feature heavily in boardroom plans as [banks plan for what this next normal](https://www.financedigest.com/how-banks-can-triumph-in-the-new-normal.html "HOW BANKS CAN TRIUMPH IN THE ‘NEW NORMAL’") will look like. [Banks can’t](https://www.financedigest.com/why-banks-cant-adopt-digital-identities-fast-enough.html "Why Banks Can’t Adopt Digital Identities Fast Enough") afford to detract from planning for the key operational priorities now, as the importance of climate risk to banks and their clients will only continue to grow. The impact of climate risk and the successful transition to a low carbon [economy will be THE next normal for the way](https://www.financedigest.com/a-two-way-street-chinese-investment-in-the-uk-will-benefit-both-economies.html "A TWO WAY STREET: CHINESE INVESTMENT IN THE UK WILL BENEFIT BOTH ECONOMIES") in which the global finance industry must be rewired to operate. BoE stress tests will be implemented – and this is going to mean people, processes and technology [need to be recalibrated to ensure banks](https://www.financedigest.com/traditional-banks-need-an-overhaul.html "Traditional banks need an overhaul") are resilient and can meet new key performance indicators. The global transition to a low carbon economy, means getting ahead of and planning for a moment in time, which will be crucial to how banks and [insurers operate successfully in the future](https://www.financedigest.com/insuring-themselves-for-the-future.html "Insuring themselves for the future"). The ability to plan for [today’s challenges](https://www.financedigest.com/from-fragmented-systems-to-unified-cpm-unicredit-prepares-for-todays-finance-challenges.html "FROM FRAGMENTED SYSTEMS TO UNIFIED CPM – UNICREDIT PREPARES FOR TODAY’S FINANCE CHALLENGES") – and have one eye on what is coming down the road, means board level leadership teams at Banks needs to be all over the key data and metrics which will definefuture success. The ability to pivot operations, plans, forecasts and teams in response to new stress test metrics will dictate the [finance industry](https://www.financedigest.com/keeping-ahead-of-network-challenges-in-the-finance-industry.html "Keeping ahead of network challenges in the finance industry") leaders who will thrive in the future and demonstrate real leadership. **[Data driven](https://www.financedigest.com/the-role-of-intuition-in-an-increasingly-data-driven-world.html "The Role of Intuition in an Increasingly Data-Driven World") metrics in real time** A [move to Digital Boardrooms will drive](https://www.financedigest.com/zeal-to-move-through-settlements-anew-to-drive-the-glyphosate-market.html "Zeal To Move Through Settlements Anew To Drive The Glyphosate Market") this new operational mindset. CXO leaders at forward-thinking banks will want the latest data driven metrics in front of them in real time, so they can [see and report back on how their Bank](https://www.financedigest.com/europes-banks-brace-for-russia-fallout-while-u-s-banks-see-limited-pain.html "Europe’s banks brace for Russia fallout while U.S. banks see limited pain") is progressing on the road to a transitioning and complying with new low carbon economy KPIs. Executive leaders across the financial [services industry will expect to be able to respond to the changing](https://www.financedigest.com/a-mindset-change-is-needed-in-the-financial-services-industry.html "A mindset change is needed in the financial services industry") business agenda, by accelerating their most important decision-making through genuine digital transformation. Take, for example, a board meeting where a bank’s [business strategy](https://www.financedigest.com/fortified-dairy-products-market-outlook-cover-new-business-strategy-with-upcoming-opportunity-2022-to-2032.html "Fortified Dairy Products Market Outlook Cover New Business Strategy with Upcoming Opportunity 2022 to 2032") is being discussed and which direction the bank should take to respond to new legislation relating to the new low carbon economy. With multiple routes available, how should a decision be made? A [digital boardroom will provide](https://www.financedigest.com/impact-com-acquires-pressboard-providing-publishers-with-a-best-in-class-platform-for-branded-content-as-digital-advertising-is-deprioritised.html "impact.com acquires Pressboard, providing publishers with a best-in-class platform for branded content as digital advertising is deprioritised") the answer. Such a decision-making platform allows anyone in the [room to perform complex scenario modelling and build strategic plans as they go and discuss potential outcomes with data](https://www.financedigest.com/optable-announces-new-data-clean-room-capabilities.html "Optable Announces New Data Clean Room Capabilities"). A bank or insurer considering the development of a new way of working to comply with new stress tests focused on their resilience,needs to answer a number of questions before [moving forward](https://www.financedigest.com/life-is-moving-forward-china-declares-new-covid-phase.html "‘Life is moving forward’: China declares new COVID phase") – what and where are the resources needed to step-up? Will the new transition require investment in people? Would it be more economical to hire additional staff, upskill existing employees or outsource certain aspects completely? What is the [impact from other potential](https://www.financedigest.com/the-potential-impact-of-coronavirus-covid-19-for-riveting-tools-market-revenue-opportunity-forecast-and-value-chain-2021-2028.html "The Potential Impact Of Coronavirus (Covid-19) For Riveting Tools Market Revenue, Opportunity, Forecast And Value Chain 2021-2028") shifts in the economy in future? **Today’s turbulent environment** Today’s turbulent environment means executive [leaders at finance organisations must](https://www.financedigest.com/to-get-employees-back-in-the-office-business-leaders-must-do-their-homework.html "To get employees back in the office, business leaders must do their homework") be able to plan, adapt and react with speed. Data silos across the organisation must be broken down, to gain a holistic [view of banks’](https://www.financedigest.com/expert-view-bank-of-england-lifts-uk-rates-to-3-in-historic-hike.html "Expert View: Bank of England lifts UK rates to 3% in historic hike") performance in line with the BoE’s new stress tests. Connecting banks’operational planning activities, joining-up functional transparency, and enabling the accurate simulation and testing of scenarios in Digital Boardrooms has never been greater in order to comply with the new [stress](https://www.financedigest.com/stress-test-backs-extending-lifespan-of-two-german-nuclear-plants-sources.html "Stress test backs extending lifespan of two German nuclear plants: sources") tests that we know will arrive at some point soon. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---