Climate risks in ICAAP and stress tests? A sensible approach to integration into bank management.

How can the risk horizon of climate developments, which span several decades, be harmonised with the management horizon of banks? We try to answer this central question in this white paper. We focus on its meaningful integration into bank management, so that this risk management topic adds value to the institution overall and sustainability becomes reality. We consider the following aspects:

- The long-term path of possible climate developments as a starting point

- The normative perspective based on capital planning with a mid-term horizon

- The economic perspective with its rather reference date-based approach

- Stress tests and scenario or sensitivity analyses over different horizons

To demonstrate that climate risks can be integrated into the management of a bank, this discussion is concluded with two practical examples.