--- title: Improving, quantifying, and assessing the impact of physical climate-related risks on financial stability and the economy in Colombia --- [![ukpact-navy-logo](https://www.ukpact.co.uk/hubfs/Core%20Site%20Files%20-%202020/ukpact-navy-logo.svg "ukpact-navy-logo")](https://www.ukpact.co.uk/) # Improving, quantifying, and assessing the impact of physical climate-related risks on financial stability and the economy in Colombia **← [Back to main page ](https://www.ukpact.co.uk/)**    ![Crown Agents](https://www.ukpact.co.uk/hs-fs/hubfs/PA%20SS%20entity%20logos/Crown%20Agents.png?width=225&name=Crown%20Agents.png) | ** Country: Colombia** | | --- | | ** Sector: Finance** | | --- | | ** Expert Partners: Crown Agents Ltd** | | --- | ***Improving the understanding of Colombia’s finance sector of the impacts of climate change on institutional practices *** This skill-share helped Colombia’s Central Bank (Banco de la Republica) and the Financial Supervision Authority (Superintendenica Financiera) to identify the channels through which climate risks can affect financial stability in Colombia, and to map these risks on the financial system through a top-down stress testing methodology.  A series of workshops built awareness of the subject and showed the statistical approaches that could be adopted to perform stress tests on the Colombian financial system. Following a literature review, the experts also recommended the use of information on precipitation to assess the impacts of El Niño on financial stability variables at the national, departmental, and sector levels. Finally, stress testing methodology  focused on the energy sector was developed with economists from the counterpart institutions, and the financial impacts of adverse climate conditions on firms in the hydroelectric power sector were mapped.       ![Colombia Crown Agents case study 2](https://www.ukpact.co.uk/hs-fs/hubfs/Skill%20Shares/Case%20study%20images/Colombia%20Crown%20Agents%20case%20study%202.png?width=600&name=Colombia%20Crown%20Agents%20case%20study%202.png) **     Counterpart:*****![Logo SFC](https://www.ukpact.co.uk/hs-fs/hubfs/UK%20PACT%20Case%20Studies/Pages/COL-001a-R%20pictures/Logo%20SFC.jpeg?width=125&name=Logo%20SFC.jpeg)***    ![Colombia Crown Agents case study](https://www.ukpact.co.uk/hs-fs/hubfs/Skill%20Shares/Case%20study%20images/Colombia%20Crown%20Agents%20case%20study.png?width=600&name=Colombia%20Crown%20Agents%20case%20study.png)   ![](https://www.ukpact.co.uk/hs-fs/hubfs/Colombia%20%E2%80%94%20SS%26S-png.png?width=500&name=Colombia%20%E2%80%94%20SS%26S-png.png)   #      Key facts **——** - **Pioneered by the Bank of England, climate stress testing **in banks is an innovative approach that is still nascent. - **In Colombia, a lot of work is being done to evaluate the impact **of transition risk from climate change on the financial system, but very little on the effects of physical risks. As a result of this project, the Central Bank and the Financial Supervision Authority will be able to translate the financial fragility of firms into effects on the financial system using the stress testing technology of Banco de la República’s Financial Stability Department. - **The experts' analysis will inform how different bank business** models will be impacted by climate risks and how organisations can improve their risk management response. ## Key achievements **——** - **The Central Bank and the Financial Supervision Authority **worked together to share knowledge and data and commit to a common goal. - **The work on stress-testing for the Colombian context made way** for a meeting with the Bank of England, who are leaders in this space, to share progress and exchange ideas. - **This skill-share has developed a granular methodology to assess** the climate change risks in the hydropower generation sector. - **The methodology developed and the data gathered will be useful** for analysing the effects of physical climate change risks on other economic sectors. - **The results from the different climate change scenarios will be **used as a tool to identify physical climate risks (impacts associated with physical damage from environmental disasters) and transition risks (risks associated with the move to a carbon-neutral economy). - **The outcomes of this skill-share are likely to inform new **regulations and policies. This will contribute to sustainable finance literature and possibly motivate new research in the field. # ** ** - **The results will support Colombia’s net zero ambitions** **for **the future. When made public, they can help increase awareness about the effects of climate change on the financial system. As a result, more policies to accelerate the transition to a net zero carbon economy may emerge. - **More widely, the work done as part of this ****skill-share **is transferable and relevant to financial institutions around the world. ![](https://www.ukpact.co.uk/hubfs/image-png-Jul-11-2022-03-00-37-72-PM.png)       ### About UK PACT UK PACT (Partnering for Accelerated Climate Transitions) is a unique capacity-building programme. Jointly governed and funded by the UK Government’s Foreign, Commonwealth and Development Office (FCDO) and the Department for Energy Security and Net Zero (DESNZ) through the UK's International Climate Finance, it works in partnership with countries with high emissions reduction potential to support them to implement and increase their ambitions for tackling climate change.   [![EXPLORE](https://no-cache.hubspot.com/cta/default/7376512/0fae3b18-54a7-43f4-a5b3-e2574bbc1203.png)](https://cta-redirect.hubspot.com/cta/redirect/7376512/0fae3b18-54a7-43f4-a5b3-e2574bbc1203) ### Quick Links ** ![ukpact-navy-logo](https://www.ukpact.co.uk/hubfs/Core%20Site%20Files%20-%202020/ukpact-navy-logo.svg "ukpact-navy-logo") © Copyright 2025     [UK PACT Privacy Notice](https://www.ukpact.co.uk/privacy-notice-ukpact)  [Cookie Policy](https://www.ukpact.co.uk/privacy-notice-ukpact-0) [Contact Us](https://7376512-hs-sites-com.sandbox.hs-sites.com/contact-us)