Republic of Kazakhstan: Financial Sector Assessment Program-Technical Note on Climate-Related Risks and Financial Stability

Republic of Kazakhstan: Financial Sector Assessment Program-Technical Note on Climate-Related Risks and Financial Stability
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Volume/Issue: Volume 2024 Issue 096
Publication date: April 2024
ISBN: 9798400273629
$20.00
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Topics covered in this book

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Finance , Money and Monetary Policy , International - Economics , Environmental Economics , Public Policy- Environmental Policy , IMF-World Bank Financial Sector Assessment Program , Climate-related TRANSITION , FSAP finding , Kazakhstan's greenhouse gas emissions , cost of goods sold , Climate change , Climate policy , Global

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Summary

Kazakhstan is vulnerable to transition risk due to the importance of its energy- and emissions-intensive sectors. Domestic and global climate policies would negatively affect Kazakhstan’s economy, its firms, industries, and banks, with heterogenous impacts across industries and banks. Using both micro and macro modeling approaches, the climate risk analysis suggests Kazakhstani banks are exposed to significant transition risk from domestic and, more importantly, global climate policies. The risk is especially higher for carbon intensive sectors, such as fossil fuel extraction, refining, and electricity generation. Banks with large exposure to emissions-intensive sectors experience up to 30 percent additional losses under a disorderly 1.5°C scenario over a 5-to-7-year horizon, compared to the baseline. Banks with a small share of portfolio with emissions-intensives sectors may still experience losses, as climate change mitigation actions affect the economy at large and the financial health of individual consumers, businesses, and industries.