Principle 9: Banks should understand the impact of climate-related risk drivers on their market risk positions and ensure that market risk management systems and processes consider material climate-related financial risks. [Reference principles: BCP 22]

38. Banks should identify and understand how climate-related risk drivers could affect the value of the financial instruments in their portfolios, evaluate the potential risk of losses on and increased volatility of their portfolio, and establish effective processes to control or mitigate the associated impacts.

39. Given the specific characteristics of market risk, analysis of a sudden shock scenario could serve as a useful tool for better understanding and assessing the relevance of climate-related financial risks to a bank's trading book. Such a scenario could, for example, feature variation in liquidity across assets exposed to climate-related risk and assume variation in the speed at which exposures could reasonably be closed out.

40. In evaluating mark-to-market exposure to climate-related risks, banks may consider how the pricing and availability of hedges could change given different climate and transition pathways, including in the event of a disorderly transition.

 Principle 10: Banks should understand the impact of climate-related risk drivers on their liquidity risk profiles and ensure that liquidity risk management systems and processes consider material climate-related financial risks. [Reference principles: BCP 24, Principles for sound liquidity risk management and supervision]