but they are prone to inconsistent quality and incompleteness. without harmonization of the definitions and methods underlying these disclosures, it will be challenging to make comparisons across firms and exposures. consistent, comparable, and, ultimately, mandatory disclosures are likely to be vital to enable market participants to measure, monitor, and manage climate risks on a consistent basis across firms. 18 the securities and exchange commission has responsibility for this critical workstream in the united states. 19 making progress going forward, it will be important to improve our understanding of climate - related financial risks and vulnerabilities. the federal reserve ’ s supervision climate committee is engaging with domestic stakeholders and other supervisors from a prudential perspective. ultimately, i anticipate it will be helpful to provide supervisory guidance for large banking institutions in their efforts to appropriately measure, monitor, and manage material climate - related risks, following the lead of a number of other countries. in addition, the federal reserve ’ s financial stability climate committee is assessing climaterelated risks to financial stability from a macroprudential perspective — that is, one that considers the potential for complex interactions across the financial system. both the prudential and macroprudential work programs will benefit from the development of climate scenario analysis. conclusion together these efforts can help ensure that the financial system is resilient to climate - related risks and well positioned for the transition to a sustainable economy. our conversations with climate experts, large banking institutions, other financial intermediaries, stakeholders, and 4 / 6 bis central bankers'speeches regulators underscore the complexity of the connections between the climate and economic and financial systems. to better understand these connections, several foreign regulators have already undertaken climate scenario analysis, affording us the opportunity to learn from their experiences. it will be helpful to move ahead with the first generation of climate scenario analysis to identify risks and potential issues and to inform subsequent refinements to our models and data. we will reach better outcomes if we tackle these challenges through open dialogue and continued engagement of the kind exemplified by today ’ s conference. 1 i am grateful to luca guerrieri and cindy vojtech as well as kevin stiroh of the federal reserve board for their assistance in preparing this text. these views are my own and do not necessarily reflect those of the federal reserve board or the federal open market committee. return to text 2 see intergovernmental panel on climate change ( 2021 ; in press ), “ summary for policymakers, ” in

lael brainard : building climate scenario analysis on the foundations of economic research speech ( via webcast ) by ms lael brainard, member of the board of governors of the federal reserve system, at the 2021 federal reserve stress testing research conference, federal reserve bank of boston, boston, massachusetts, 7 october 2021. * * * i want to thank all of you for joining our research conference and the organizing committee for inviting me to share some thoughts on climate scenario analysis. 1 economic analysis suggests that climate change could have profound consequences for the level, trend growth, and variability of economic activity over time and across regions and sectors. some of these effects could occur gradually, while others could occur relatively quickly in the presence of “ tipping points. ” policy, technology, and behavioral responses could similarly have material financial consequences. against this backdrop, the federal reserve is carefully considering the potential implications of climate - related risks for financial institutions and the financial system, with scenario analysis emerging as a potential key analytical tool for that purpose. climate change is projected to have profound effects on the economy and the financial system, and it is already inflicting damage. the sixth assessment report by the intergovernmental panel on climate change ( ipcc ) notes that “ if global warming increases, some compound extreme events with low likelihood in [ the ] past and current climate will become more frequent, and there will be a higher likelihood that events with increased intensities, durations and / or spatial extents unprecedented in the observational record will occur. " 2 we can already see the growing costs associated with the increasing frequency and severity of climate - related events. the total cost of u. s. weather and climate disasters over the last 5 full years exceeds $ 630 billion, which is a record. 3 during this period, massive flooding in the midwest has caused billions of dollars in damages to farms, homes, and businesses. 4 the california department of insurance has documented growing problems with the availability of fire insurance for homeowners, and the state legislature provided new protections for wildfire survivors. 5 last year was the sixth consecutive year that the united states experienced ten or more billion - dollar weather and climate disasters. 6 and this summer, hurricane ida alone is estimated to have caused more than $ 30 billion in insurance losses. 7 the pandemic is a stark reminder that extreme events can materialize with little warning and trigger severe financial losses and market disruptions, and the ipcc sixth assessment report is a reminder of the