IMF-巴西氣候變化：主要脆弱性和機(jī)遇 Changing Climate in Brazil Key Vulnerabilities and Opportunities 2024

ChangingClimateinBrazil

KeyVulnerabilitiesandOpportunities

ChenChen,KoralaiKirabaeva,ChristinaKolerus,IanParry,andNateVernon

WP/24/185

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NAT

2024

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ARi

*Theauthor(s)wouldliketothankAnaCorbacho,JamesRoaf,RishiGoyal,SwarnaliHannan,StephaneHallegatte,andseminarparticipantsattheIMFWHDseminarfortheirvaluablecomments,aswellasMengqiZhao(atPacificNorthwestNational

Laboratory),KarlygashZhunussovaandDanchenZhaofortheirinputstothemodelingexercisesandGabrielMouraQueirozforexcellentresearchassistance.

?2024InternationalMonetaryFundWP/24/185

IMFWorkingPaper

WesternHemisphereandFiscalAffairsDepartment

ChangingClimateinBrazil:KeyVulnerabilitiesandOpportunities

PreparedbyChenChen,KoralaiKirabaeva,ChristinaKolerus,IanParry,andNateVernon*

AuthorizedfordistributionbyAnaCorbachoandJamesRoafAugust2024

IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicit

commentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseofthe

author(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement.

ABSTRACT:ThispaperassessestheBrazilianeconomy’sexposuretoclimatechangefocusingontwokey

areas:agricultureandhydropower.Whileclimatevulnerabilitiesaresignificantandrecentpatternsofland-usefurtheramplifyclimatechangerisk,Brazil’sopportunitiesforgreengrowtharevast.Givengeographyand

existinginfrastructure,notablytheverygreenenergymix,Brazilcanboostitseconomicpotentialwhile

mitigatingapotentialtradeoffbetweenenergyuse,emissions,andgrowth.Policyoptionstoaddresskey

vulnerabilitiesandleverageopportunitiesincludeboostingtheAmazon’sresilienceviafiscalincentivesfor

forestprotection,investinginclimatesmartagricultureandinsuranceguidedbysustainablefeebates,

continuingthediversificationofrenewablepowergeneration,andstimulatinggreengrowthwhilegreeningthefinancialsector.

RECOMMENDEDCITATION:ChenChen,KoralaiKirabaeva,ChristinaKolerus,IanParry,NateVernon(2024).“ChangingClimateinBrazil:KeyVulnerabilitiesandOpportunities”.IMFWP/24/185

JELClassificationNumbers:

Q17,Q48,Q54,Q56,H23,O13

Keywords:

Climatechange;deforestation;fiscalincentives;feebate;carbonmarket;adaptation

Author’sE-MailAddress:

cchen3@,

kkirabaeva@,

ckolerus@,

iparry@,

nvernon@

WORKINGPAPERS

ChangingClimateinBrazil

KeyVulnerabilitiesandOpportunities

PreparedbyChenChen,KoralaiKirabaeva,ChristinaKolerus,IanParry,andNateVernon

IMFWORKINGPAPERSPolicyOptionstoAddressClimateVulnerabilitiesandGreentheEconomy

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Contents

Introduction 3

KeyVulnerabilities 4

Agriculture 4

Hydropowergeneration 5

Financialsector 8

PolicyOptionstoStrengthenResilienceandGreentheEconomy 9

Brazil’sclimatestrategies 10

BoostingtheAmazon’sResilience 12

InvestinginClimate-SmartandSustainableAgriculture 18

DiversifyingPowerGenerationSources 22

LeveragingOpportunitiesforGreenGrowth 23

Conclusion 25

Annex1.DesignIssuesforFeebatestoPromoteForestCarbonStorage 27

References 28

BOXES

1.CostaRica’sPaymentsforEnvironmentalServiceProgram 16

2.NewZealand’sPricingSchemeforForestry 18

FIGURES

1.CommodityPriceDifferentialsandPastDroughts 4

2.RuralInsuranceandDroughtRisk 5

3.ElectricityMixandClimateImpactonHydropower 6

4.RenewableEnergyPipelineandPotentialPowerGaps 8

5.BankandInsuranceExposuretoClimateRisks 9

6.EmissionsandEnergyProfile 10

7.CostEffectiveMitigationPotential,AnnualAverageto2050 13

8:Climatechangeimpactonagricultureoutputandtradewithandwithoutadaptation 20

9.EmissionIntensityAcrossProductsandDefinitions 21

10.Brazil’sGlobalMarketShareinSelectedGreenIndustries 24

TABLES

1.MitigationCommitmentsforLargeDeforestationEmitters 12

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Introduction

ChangingclimateconditionsarealreadyaffectingBrazil’seconomy.RisingtemperaturesinBrazil(between

+1°Cand+2.2°Cby2050)andtemperaturevariabilityhaveincreasedbothpresentoccurrencesandthefuturelikelihoodofextremeweatherevents.ThemostcommonextremeeventsinBrazilarefloods,whichhavemorethandoubledrelativetothe1980s-90s

1

andoftenresultinphysicalandhumancapitallosses,particularlyif

linkedtolandslides.Theymostlyoccurintheformofflashfloodsorriverinefloodsandcancausetemporaryproductivitylossesanddisruptionsin

infrastructure,2

significantfiscalcosts,andsometimesdurableoutputscarring.Secondmostfrequent,yetcostliestclimatehazardsaredroughts,whichimpactagriculturaloutputandelectricityprices(BCB,2023a),andextremeheatwaves,whichmainlyoccurinurbanareas.TheWorldBankestimatesthatextremeweathereventshavegeneratedyearlyoutputlossesof0.13percentofGDPonaverageoverthepast20years(WorldBankCCDR,2023).

Agricultureandpowergenerationarekeysectorsatrisk,withpotentialrepercussionsforthefinancialsector.Inaddition,patternsofland-useamplifyclimatechangerisksbyprofoundlyaffectingwatercycles.Increasingdry-seasonlengthanddroughtfrequency

3

havediminishedtheAmazon’sresilienceagainstshocksandmayhave

alreadypushedtheAmazonclosetoacriticalthresholdofrainforestdieback(Boultonetal2022).

4

Deforestationhasfurtherincreasedthelikelihoodofreachingatippingpointthatwoulddurablydisruptwater

cycles,accelerateerosion,limitcarbonstorage,andreleasesizeableamountsofcarbonintotheatmosphere.Indecreasingtheavailabilityoffreshwater,deforestationmakeswater-intensivesectorsmorevulnerable(suchasagricultureandhydropower,butalsominingandindustry).Whileestimatesoftheimpactofclimatechangeontheeconomyaresubjecttosignificantuncertainties,someestimatesquantifytheoutputlossofreachingtheAmazontippingpointforBrazilaloneat10percentof2022GDPthrough2050(Zilietal,2020).

Brazilisinauniquepositiontogreenitseconomyandboostpotentialgrowth.BuildingonBrazil’sverygreen

energymixandworld-wideleadingbiodiversity,Brazilcanincreaseitseconomicpotentialwhilemitigatinga

potentialtradeoffbetweenenergyuse,emissions,andgrowth.Opportunitiesfortheprivatesectorincludetheexportofgreenenergyaswellasexport-orientedmanufacturingtoseizegrowingdemandforgreengoodsandservices.Thesizablepipelineofrenewableenergyprojectswillhelpfurtherdiversifytherenewablesenergy

portfolioandprepareforthepotentialexportofgreenenergy,butneedstobeaccompaniedbyinvestmentsinthegridandinstoragefacilities.Therecentapprovalofacap-and-tradecarbonmarkettocomplementthe

voluntarycarbonmarketcanfurtherhelpgreenBrazil’seconomyfromaregulatoryperspective.Atthesametime,adaptationinvestmentsinclimate-smartagricultureandforestprotectionaswellaswell-designedfiscal

1

EM-DAT,

CRED/UCLouvain,2023,Brussels,Belgium

2Morethan5percentofBrazil’sroadandrailwayinfrastructureisexposedtofloodrisks(WorldBankCCDR,2023).

3Thecurrent2023-24exceptionaldroughtintheAmazonbasinleftwaterlevelsatrecordlow.

4EvidenceonreachingtheAmazontippingpoint,however,ismixedandsomestudiessuggestthatthedecreasingtrendinforestresilienceislimited,andhasbeenpartlyreversedinrecentyears(Taoetal,2022).

incentivesforforestryandagricultureareneededtofosterresilienceofBrazil’secosystemsandloweremissionstowardsmeetingBrazil’sgoalofnetzeroemissionsin2050.

ThepaperdiscusseskeyvulnerabilitiesinsectionII,andthenlaysoutmacropolicyoptionsinsectionIII

buildingoncross-countryexperience.Inparticular,thePapercoverspoliciesto(i)boosttheAmazon’s

resilience;(ii)investinclimate-smartagricultureandinsurance;(iii)diversifyenergysources;and(iv)leverageopportunitiesforgreengrowth.

KeyVulnerabilities

Agriculture

TraditionalagricultureproductioninBrazil,i.e.farmingandlivestock,contributesonlyaround7percentofGDPtoBrazil’seconomy.Agribusiness–traditionalagricultureplusprocessingandagro-relatedservices–amounttoalmost25percentofGDPandabout50percentoftotalexports.Adverseweatherconditions,including

throughstrongerepisodesofElNi?o,whichalterprecipitationpatterns,aswellasincreaseddroughtriskshaveaprofoundimpactonagriculturalproductionandprices,andthusonBrazil’seconomy.The2010drought,forinstance,widenedthepricedifferentialbetweendomesticandinternationalmarketsby50percentforcoffee

andlivecattle,and100percentforcorn,measuredyear-on-yearasofend2011(Figure1),correspondingtoadomesticpriceincreaseofaround50percentforeachproduct(andalmostdoublingpricesforcoffeeandcornthroughoutFebruary2011).Domesticpricesforsoybeansandsugarincreasedby25percentyearonyear.

Similarmagnitudeswereobservedduringsubsequentdroughts,withsomevariabilityacrossproducts.

5

Figure1.CommodityPriceDifferentialsandPastDroughts

5Thetimingofdroughtsdiffersacrosssources,withvaryingintensityacrossregions.Overall,historicaldroughtstookplacein1997-98,2002-03,2010and2012-2018(GAR2021),withsomesourcessinglingout2014and

2016.Municipalitiesaffectedbydroughtincluded1061in2012,551in2013,229in2014,621in2015,462in2016,and617in2017(Cunhaetal.2019).

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Increasingfrequencyandlengthofdryseasonsraisesdroughtrisksforagriculturalproductioninboththe

NorthernandSouthernregionsofBrazil.

6

Theimpact,however,ismoresevereintheNortheastastheregion’ssmall-scaleagricultureisrainfed,withlimitedirrigationsystemsinplace,andsignificantlylowerinsurance

coverage.Onlyabout20percentoffarmingactivityiscoveredbyinsuranceonaverage,

7

withSouthern

farmerssignificantlymoreinsuredthantheirpeersintheNorthandNortheast.However,droughtrisksaffectbothNorthernandSouthernregions(Figure2).DroughtshavefurtherdiminishedtheAmazonandCerradobiomes’resilienceagainstshocks,and,aidedbydeforestation,increasedthelikelihoodofreachingatippingpointthatwoulddurablydisruptwatercycles.TheWorldBankquantifiestheoutputlossofreachingthe

AmazontippingpointforBrazilaloneat10percentof2022GDPthrough2050(WorldBankCCDR,2023).

Figure2.RuralInsuranceandDroughtRisk

Hydropowergeneration

Brazil’senergymixisoneofthegreenestworldwide,withalmost90percentofelectricitygeneratedby

renewablesin2022.Hydropoweristhelargestenergysource,producingaround60percentofBrazil’s

electricity,downfrom90percentduringthe2000sasotherrenewablesweresteadilyexpanding(Figure3,left).

Changingclimateconditions,includinglowerwateravailabilityandshiftingrainfallpatterns,willaffect

hydropowergeneration,leadingtohighervolatilityandreducedoutput.Atthesametime,powerdemandis

increasingduetoeconomicgrowthaswellasincreaseddemandforcooling.Weestimatethatpastdeviationsfrommeantemperaturesby+0.1Cinacalendaryearhaveledtoalowercapacityutilizationof2-3percentinthesameyear,implyingsignificantvolatilityalreadyatcurrentclimateconditions(Figure3,right).Adropin

hydropowergenerationpushesupenergycostsas(morecostly)thermalpowerplantsneedtobeswitchedon

6Agricultureisestimatedtolose1percentofitssectoralGDPperyearduetoextremeweatherevents(WorldBankCCDR,2023).

7Source:

SuperintendênciadeSegurosPrivados

(SUSEP),Brazil’ssupervisorybodyforprivateinsurers.

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tofillthegap.The2021drought,forinstance,increasedinflationby0.7percentagepoints(BCB2022a)mainlythroughincreasingelectricityprices.

Figure3.ElectricityMixandClimateImpactonHydropower

Inthecomingyears,slow-movingtemperatureincreasesandprecipitationchangesareexpectedtofurther

intensifydisruptionstohydropowersupply,lowerdispatchablehydrocapacities,

8

andincreasethepotentialforpowergaps:

Climateimpactonhydropowergeneration.ProjectionsfordispatchablehydrocapacityinBrazilaretakenfromthePacificNorthwestNationalLaboratory(PNNL)’sglobalhydrologicalmodel,Xanthos,

designedtoquantifyandanalyzeglobalwateravailability(Zhao,Wild,andVernon,2023).

9

Xanthosprovideshistoricaldata(from1850onwards)as

wellasprojections(upto2100)athighgeographicandtemporalresolution.

Dispatchablehydrocapacitiesareestimatedtodeclinebyapproximately20percentonaverageby2050underahighemissionscenariothat

closelymirrorscurrenttrends.Theestimatesrangefrom9to28percentfrom2030to2050.Undermildclimatechangeassumptions,

dispatchablehydrocapacitieswouldremain

broadlysimilartocurrentlevelsbutfeaturehighervolatility.

8Dispatchablecapacityreferstothesourcesofelectricpowerthatcanbeprogrammedondemandanddispatchedimmediatelywhenneeded.

9XanthosOutputDatasetUnderISIMIP3bSelectedCMIP6Scenarios:1850-2100(BasinandRegionalScale)(v0.0)[Dataset].MSD-LIVEDataRepository.

/10.57931/1923091

.

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Climateimpactonpowerdemand.Totalpowerdemandisestimatedtoincreaseby2-4percentduetochangingdemandsforcoolingandheating.ProjectionsontheimpactofclimatechangeonpowerdemandweredrawnfromtheprojectionsoftheGlobalChangeAnalysis

Model(GCAM),10

amarketequilibrium

modelbythePNNL,whichiscompatiblewithXanthosandoperatesfrom1990to2100.Themodelallows

toexaminesectoraldynamicsundervarious

climatepathwaysandscenarios.Themodel

projectionreflectstheimpactofslow-moving

temperatureincreasesandprecipitationchangesonpowerdemandofcommercialandresidentialbuildings,takingintoaccounttheevolving

demandsforcoolingandheating.Whileresidentialdemandisexpectedtoincreaseinlinewiththe

baseline,commercialpowerdemandissettorisebyaround3?percentinadditiontothebaseline,assumingahighemissionscenariothatclosely

mirrorscurrenttrends.

Powergaps.Buildingontheestimatedevolutionofhydropowergenerationandpowerdemand,potentialpowergapsarecomputedusinganextensionoftheIMF’sClimatePolicyAssessmentTool(CPAT).ThestandardCPATpowerdemandequationwasextendedforbothresidentialandservicesectors(aspartofthecommercialsector),toaccountforthepercentagechangesinpowerdemandtakenfromtheGCAM.HydropowergenerationprojectionswereintegratedinCPAT’sengineeringmodelalgorithmintwosteps.First,anupperboundonhydropowergenerationwasintroducedbyyear.Second,theupperboundwas

parametrizedinlinewithXanthos’sprojections,representingtheimpactofclimatechange.Third,dispatchdecisionsonhydropowergenerationwerebasedontheminimumbetweentheupperboundandthe

historicalcapacityfactor.Tofinalizethecomputationofpowergaps,wemakethefollowingassumptionsonthepathofrenewables:strictlyfollowingthecurrenttrajectoryofinvestmentsinrenewables,additionalrenewablecapacitywillexperienceamoderateincreaseofapproximately2-5percentcomparedtothe

baselinein2030,bringingcumulatively28.6GWnewcapacitysourcedfromwind,solar,andother

renewables(Figure4).Underthistrajectory,powergapsariseduetohydrodeficiencyandincreasing

demand:absentanexpansioninpowergeneration,thetwolattereffectscouldresultinpowerdeficiencyupto82TWHin2030(or14percentofthepowersupplyin2021).Theassumedtrajectoryisrather

conservativeanddescribesalowerboundofpotentialpowergaps.Brazil’senergyagencyANEEL

(AgenciaNationaldeEnergiaElectrica)compilesapipelineofongoinginvestmentswhichareexpectedtoproduceadditionalrenewablecapacitiessignificantlyabovetheseassumptions(Figure4).

Impactonemissions.Atgiventrajectories,thesepowergapsmaybefilledbyhigherfossilfuel

consumption,atleastintheshorttermbeforesignificantlyscalinguprenewablecapacities(expected

around2028,accordingtotheANEELpipeline).ApplyingCPAT,whichoptimizesthefuelmixinthepowersectorundergivencoststructuresandcapacityconstraintsofBrazil’senergysystem,themodelshows

thatthedemand-supplygapwouldbecoveredbyasignificantshareoffossilfuelsbetween2024and

2028.Fossilfuelconsumptionwouldexperienceacumulativeincreaseby20-70percent,reintroducingup

10

GCAM:GlobalChangeAnalysisModel|GlobalChangeIntersectoralModelingSystem().

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to96megatonsofCO2intotheatmosphereoverthesameperiod.Thisincreaseinemissionisequivalenttoaround20%oftotalemissioninBrazilin2019.

Figure4.RenewableEnergyPipelineandPotentialPowerGaps

Financialsector

About20percentofthefinancialsector’screditportfolioisexposedtosectorsvulnerabletoclimatechange,withtheshareofagriculture(businessesandruralhouseholds)increasingtoaround12percentoftotalbankloansoverthepastdecade(Figure5,left).Credittocompaniesintheenergysectoramountstoaround5

percentofGDP(includingcreditforrenewableenergyprojects),andaround3percentofGDPfinances

constructionactivities.Theportfolioexposureislikelyalowerbound,givenothersectors’sensitivitytoclimateconditions,includingtourism.Amitigatingfactorcouldbetheshort-termnatureoftheextendedcredit,in

particularintheagriculturesector,whichcouldincreasethescopeforadaptation.

TheBCB(2023a)estimatesthataround8percentofthefinancialsector’screditportfolioissensitiveto

transitionrisks,concentratedonsmallerfinancialinstitutions,notablylendingtothecattleandsoybean

industry,aswellascargoandtransportation.Focusingonphysicalrisksanddroughtscenarios,theBCBnotesthat16percentofthecreditstockiscurrentlywithwater-intensiveborrowers,increasingto19percentin2030.Operationsatriskfromheavyrainfalleventsarecurrentlycontainedbutestimatedtoincreaseto16percentin2030and30percentin2050.The2021-22droughtdoubledpremiaandclaimsforagriculturalinsurance

contractsofferedbytheprivatesector(Figure5,right).Whilepremiaremainedaboveclaimsthroughout,

suggestingfrequentre-pricingofcontractsandaprofitableinsurancesector,thesedevelopmentsincreasetheriskthatinsurersmayexitmorevulnerableregions,reducingtheirfinancialresilience,orthatprivateinsuranceproductsbecometooexpensiveforlower-incomefarmers.

RecentregulatorychangesbytheBCB,whichincreaseddisclosurerequirementsforfinancialinstitutions

relatedtoqualitativeaspectsofclimateriskintheareasofgovernance,strategy,andriskmanagement(seesectiononBrazil’sclimatestrategies),seemtohaveinfluencedlendingbehaviorofmainlylargerlenders.The

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latterhavestartedtoreallocatetheirportfoliotolessenvironmentallyexposedsectors(Faruk,Pedraza,andRuiz-Ortega,2023).

Figure5.BankandInsuranceExposuretoClimateRisks

PolicyOptionstoStrengthenResilienceandGreentheEconomy

Brazil’scarbonemissionsaccountforabout3.5percentofglobalemissionsdespitetheverygreenenergymix(Figure6).Emissionsareconcentratedincarbondioxide(60percent)andmethane(32percent).Average

emissionsfrom2017to2020weredrivenby:agriculture(34percent);land-usechange(29percent,LULUCF);industry(12percent,ofwhichabouthalfareprocessemissions);transportation(12percent);andwaste,powergeneration,andbuildings(11percentcombined).Therelativelylowemissionsthroughpowergenerationareduetothehighshareofrenewablesinenergyproduction(seesectionKeyvulnerabilities).Duetoalarge

reductioninemissionsfromLULUCF,emissionsfellbyaround2gigatonsfrom2005to2010,reducingBrazil’sshareofglobalemissionsfromninetothreepercentofglobaltotals.Emissionspercapitahaveincreasedoverthepastdecadefromaround3.1tocurrently5.2tonsbutarewellbelowthepeaklevelof11tonsin2003andstillbelowtheworldaverage.

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Figure6.EmissionsandEnergyProfile

Brazil’sclimatestrategies

Brazilincreaseditsclimatepledgesin2023,returningtoitsoriginal2015target.TheupdatedNationally

DeterminedContribution(NDC)commitstoreducingemissionsby53percentbelow2005levelsby2030,

coveringallmajoremissionssources(includingmethaneandland-usechange),andreachingnetzero

emissionsby2050.AchievingtheNDCrequiresfurtherloweringdeforestationandagriculturalemissions,andcontinuingreductionsintransportationandindustrialemissions.Brazilwillneedtoreduce2020emissionsby28percentby2030toachieveitsNDC.

Importantprogresshasbeenmadeinaddressingbothclimatevulnerabilitiesaswellasseizingopportunitiesofagreentransition.TheMinistryofFinance’sEcologicalTransformationPlanaimstosteergreengrowthby

enhancingtechnologyandproductivityinagreenandequitableway,whiledecarbonizingtheeconomy.Theplancomprisessixpillarsandisbeingimplementedinclosecooperationwithotherministries:

PromotinggreenfinancebyoperationalizingthemandatoryEmissionsTradingSystem(ETS),whichestablishesacap-and-tradesystemtargetingemittersthatreleasemorethan25,000tonsofCO2

equivalentannually,agreentaxonomy,regularissuancesofgreenandsocialbonds(withthefirstissuancetakingplaceinNovember2023),andgreenfinancialregulation;

EnhancingproductivitythroughgreenR&Danditstransformationintobusinesses,includingbyleveragingfundsfromtheoilsectorforthetransitionandincentivizingcreditallocation;

Shapinga“bioeconomy”viaintegratingagriculturalproductionwithforestprotectionincludingthroughecotourism,biotechnologies,andpaymentforenvironmentalservices;

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Acceleratingtheenergytransitionbybecominganexporterofenergywithgreenhydrogen,buildingonBrazil’ssuccessinusingethanolinthetransportsector,includingfrombiomass,andinvestinginenergystorage;

Leveragingthecirculareconomybyusingwasteandsewagesystemstoproduceelectricity;and

Buildingresilientinfrastructuretodealwithclimateshocksandrestoreclimatejusticeforpoorerhouseholds.

TheBancoCentraldoBrasil’s(BCB)SustainabilityAgendaiswell-advanced,coveringregulation,supervision,policydesign,aswellasinternalmeasuresandresearch.Theagendaaimstoincentivizethefinancialsystemtooffermorefavorableconditionsforsustainableoperations,whilemaintainingthefocusonfinancialstabilityandresilience.TheAgendacomprises:

Regulation.FollowingtheNetworkforGreeningtheFinancialSystem’srecommendations,theBCBhasbeenworkingonincorporatingsustainabilityaspectsintoprudentialregulation.Inafirststep,financial

institutionswereaskedtodisclosequalitativeaspectsofclimateriskrelatedtogovernance,strategy,andriskmanagement.Inasecondstep,fromend-2023onwards,disclosureisexpandedtoquantitative

aspects,includingmetricsandtargets,mappingexposurestoclimate-relatedtransitionriskandvoluntarydecarbonizationtargetsbyfinancialinstitutions.Riskassessmentregulationalsorequiresfinancial

institutionstoincludebothphysicalandtransitionalrisksintheirintegratedmanagementframework,applyingstresstesting,riskappetitestatement,andboardinvolvementtosocial,envi