7. Banks are potentially exposed to climate-related financial risks regardless of their size, complexity or business model. Climate-related financial risk drivers can translate into traditional financial risk categories [See BCBS, Climate-related risk drivers and their transmission channels, April 2021.]. Banks should therefore consider the potential impacts of climate-related risk drivers on their individual business models and assess the financial materiality of these risks. Banks should manage climate-related financial risks in a manner that is proportionate to the nature, scale and complexity of their activities and the overall level of risk that each bank is willing to accept [See BCPs 8, 9, 14 and 15, and SRP 30.4, 31.5 and 31.30.].

8. Climate-related risk can have wide-ranging impacts in terms of the sectors and geographies it affects. Banks should take into account the unique characteristics of such risks, including but not limited to potential transmission channels, the complexity of the impact on the economy and financial sector, uncertainty related to climate change and potential interactions between physical and transition risks.