Risk.net – Inaugural Fed climate scenario analysis flags lack of transparency around third-party models: “The US Federal Reserve and the country’s largest banks have had their differences, especially in recent months. But the regulator’s first ever climate scenario analysis has revealed a common cause: frustration over the climate risk models provided by third party vendors. The analysis was launched in January 2023, with the findings published in May this year. Among its conclusions from the exercise, the Fed observed: “Participants noted that the lack of historical data and the proprietary nature of vendor models inhibited their ability to independently assess model performance.” According to seven sources who spoke to Risk.net, this sentiment is widespread across the banking sector, including the six global systemically important banks (G-Sibs) that participated in the scenario analysis. “If we want informed users and a healthy discussion about these models, then we need better disclosure about the inputs and assumptions and more systematised disclosure,” says Ilmi Granoff, senior fellow at the Sabin Center for climate change law and a member of the US Treasury’s climate-related financial risk advisory committee. In fact, experts question the value of risk assessments if the inputs and models cannot be explained. Ramalingam Saravanan, head of the department of atmospheric sciences at Texas A&M University, does not think the process banks and their vendors used for the scenario analysis was “open and transparent”…”