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IMF Country Report No. 24/169
KINGDOM OF THE NETHERLANDS— THE NETHERLANDS
FINANCIAL SECTOR ASSESMENT PROGRAM TECHNICAL NOTE ON CLIMATE RISK ANALYSIS
June 2024
This paper on the Kingdom of the Netherlands—The Netherlands was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on May 28, 2024.
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Title page
KINGDOM OF THE NETHERLANDS—THE NETHERLANDS
FINANCIAL SECTOR ASSESSMENT PROGRAM
TECHNICAL NOTE
CLIMATE RISK ANALYSIS
May 28, 2024
Prepared By
Monetary and Capital Markets Department
This Technical Note was prepared by IMF staff in the context of the Financial Sector Assessment Program (FSAP) in the Netherlands. It contains technical analysis and detailed information underpinning the FSAP’s findings and recommendations. Further information on the FSAP can be found at http://www.imf.org/external/np/fsap/fssa.aspx
Contents
Glossary
EXECUTIVE SUMMARY
PHYSICAL RISK ANALYSIS – BANKING SECTOR
A. Overview: Physical Risks in the Netherlands
B. Flood Scenarios
C. Flood Damages Estimation
D. Macro-Approach Stress Test
E. Results
F. Recommendations
PHYSICAL RISK ANALYSIS – INSURERS
A. Insurers’ Exposures to Physical Risks
B. Approach and Scope of the Physical Risk Analysis
C. Results of the Physical Risk Analysis
TRANSITION RISK ANALYSIS – NITROGEN
A. Nitrogen in the Netherlands
B. Analysis of Bank Exposure to Nitrogen
C. Recommendations
FIGURES
1. Physical Climate Risks
2. Dutch Financial Sector’s Exposure to Physical Risks
3. Regions for Flood Scenarios
4. Flood Scenario Design Scheme
5. Damage Function for Direct Damage
6. Damage from Germany and Belgium
7. Impact of Climate Changes in the Unembanked Area
8. Impact of Climate Changes and Adaptation in the Embanked Area
9. Impact of Extreme Flood Scenarios
10. Impact of Floods in the Neighboring Countries
11. Insurers’ Physical Climate Risks—Natural Catastrophes
12. Insurers’ Physical Climate Risks—Flood Events
13. Insurers’ Physical Climate Risks—Natural Catastrophes
14. Nitrogen in the Netherlands
15. Nitrogen Emission in the Netherlands
16. Nitrogen Concentration and Deposition Intensities
17. Nitrogen Emission Intensity
18. Nitrogen Concentration and Deposition Intensities
19. Financial Indicator of Firms by Nitrogen Emitting Sector
TABLES
1. Key Recommendations
2. Flood Types Classification
3. Scenarios for Flood Type B
4. Numbers of Breaches by Region and Return Period
5. Categories and Maximum Damage in SSM2017
APPENDICES
I. Climate Risk Analysis by DNB
II. Credit Risk Module
ANNEXES
I. Capital and House Price Shocks under Flood Scenarios
II. Flood Map of the Extreme Scenarios
Glossary
| CBS | Statistics Netherlands (Centraal Bureau voor de Statistiek) |
| DNB | De Nederlandsche Bank |
| ESRI | Environmental Systems Research Institute |
| ENW | The Expertise Network for Flood Protection (Expertise Netwerk Waterveiligheid) |
| GMM | Global Macro-financial Model |
| IPCC | Intergovernmental Panel on Climate Change |
| KNMI | Royal Netherlands Meteorological Institute (Koninklijk Nederlands Meteorologisch Instituut) |
| LIWO | National Water and Flood Information System (Landelijk Informatiesysteem Water en Overstromingen) |
| MIENW | Ministry of Infrastructure and Water Management (Ministerie van Infrastructuur en waterstaan) |
| NCR | The Netherlands Centre for River studies |
| NWB | The National Road Database (National Wegenbestand) |
| PBL | Netherlands Environmental Assessment Agency (Planbureau voor de Leefomgeving) |
| P&C | Property and Casualty |
| RCP | Representative Concentration Pathway |