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

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