TCFD REPORT 2021 TACKLING CLIMATE CHANGE 47 CLIMATE-RELATED RISK MANAGEMENT Moreover, this exercise allowed to identify the limits of the proposed scenarios which would warrant a review with regards to their severity and the scope of economic sectors covered in light of the urgent need for action to limit climate change, owing to the wide-scale impact it can have on society and the overall economy. As a result, the impact in terms of credit risk is negligible over the considered timeframes. As such, there is a need to upgrade them further out to make them more suitable to this type of exercise. In particular, it would be appropriate to carry out a fundamental review of assumptions on the economic impacts of the ecological transition, to provide other measurement indicators better reflecting those used by the banks, and to carry out further work on the models and projection mechanisms to better manage long-term impacts. For the market risk component, overall, the impact of climate stress remains limited across the entire portfolio. Stress is largely attributable to balance sheet projection as opposed to stress related to risk parameters. Factoring in the low impact recorded in the stress tests, there will be no directly related management action. Nevertheless, the introduction of limits on investments in sectors with a highly negative climate impact will be reviewed as part of the integration of climate risk. European Banking Authority sensitivity exercise As part of a regular assessment of bank risk exposure within the European Union (EU), an analysis of climate risk sensitivity was conducted in second-half 2020 with a sample of volunteer banks. The initiative was managed by the European Banking Authority (EBA). The sensitivity analysis aims at providing better insight into banks’ vulnerabilities to climate risk and calculating an initial estimate of the amount of green exposure held by banks in line with the European taxonomy. BPCE Group and Natixis volunteered to complete this exercise and individually reviewed several clients based on publicly available data (Extra-Financial Performance Declaration) and by comparing client practices to European taxonomy expectations to calculate their share of green activities. The Green Weighting Factor developed by Natixis was also applied to the entire balance sheet that was shared with the EBA for additional information.