Benchmark Scenario Working Group

The Benchmark Scenario Working Group was established by the Climate Risk Forum in 2020 to advance the thinking with respect to the following recommendation in National Treasury’s Technical Paper “Financing a Sustainable Economy” (Draft published May 2020; finalised Oct 2021) :

“1.5 c)  Develop a benchmark climate risk scenario for use in stress tests by the [South African financial services] sector.”(Page 6)

Working Group Members

The Working Group is chaired by the Prudential Authority (PA). The initial phase of work is supported by the International Food Policy and Research Institute (IFPRI). Members include

  • National Treasury
  • South African Reserve Bank
    • Financial Stability Department
    • Economic Research Department
    • Prudential Authority (Working Group Chair)
  • Financial Sector Conduct Authority

Benchmark climate risk scenarios

Scenarios, by their nature, can often provide more questions than answers, and thus require an iterative process.

The draft report on the first set of these scenarios, which cover transition and physical risks, was presented and released for comments in June 2022.

The updated report, dated May 2023, is provided below together with a summary of comments and responses from the consultation.

Click the image above or download the documents via the following links:

About these scenarios

These benchmark climate risk scenarios are intended as a tool for all banks, insurers and other firms to use as part of their internal climate risk analysis, disclosures and risk management.

Climate-related risk scenarios are in early stages of development, and require considerable data, skills and expertise. The benchmark scenarios presented leveraged domestic work done, and a first attempt to align these SA models and scenarios with international developments.

Users and stakeholders should note the following clarifications on the objectives of the proposed scenarios:

  • The objective is to publish these scenarios to enable information sharing and knowledge building in an open and transparent manner.
  • The development of these benchmark scenarios is primarily for financial firms to improve their understanding of risks and capabilities, and not for policy or supervisory objectives.
  • These scenarios are ‘open access’ products and are not a mandated tool of the SARB, Prudential Authority, FSCA or National Treasury.
  • These scenarios reference local data and modelling, which provide best available data and models for South Africa. These are deemed applicable for firms to use in climate related risk scenarios to better understand their exposure to climate risks and to internalise these risks as appropriate to their situation. These scenarios are based on work done in South Africa to date, under the guidance of a working group.
  • The scenarios described in the paper do not provide an analysis of the impact on the financial sector as it is deemed the responsibility of each financial institution to generate these impacts.