We take a positive view of the European Central Bank's climate risk stress test because it paves the way for banks to better understand and integrate climate risks into their risk-management frameworks. Banks will have to forecast potential losses stemming from climate risks and report how they would amend their business models under various long-term climate change scenarios. The results, due July 2022, will provide insight into where the biggest climate risks lie. Given the assumptions set by the ECB, we believe that most banks will report only limited capital impact overall.