Josef Ressel Center for Robust Decisions

The published open-access article "Inclusion of carbon pricing into stress testing for the Austrian banking sector" discusses two different approaches to integrating carbon price developments into the stress tests of Austrian banks.

The integration of the CO₂ price into overall bank risk management via stress tests is becoming increasingly important as it enables a realistic mapping of climate-related risks. It enables the assessment of weaknesses within bank portfolios and provides a basis for ESG considerations.

The application of the approaches to a sample portfolio shows clear differences in the default probability estimates and underlines the importance of the choice of methodology. This not only strengthens the resilience of banks to climate risks, but also supports the strategic orientation in terms of sustainable financial practices.

The article was written within the Josef Ressel Center for Robust Decisions in cooperation with Hypo Vorarlberg and published in the Springer Journal "Risk Management".

> Click here's to the article!