A recently retracted climate change article cited over 400 times has been used as evidence for climate change risk assessments for Canadian financial institutions.In a previous article, the Western Standard reported on, The economic commitment of climate change (cited: Kotz et al 2024), a climate change article published by Nature, which stated the article's data was inflated."The authors of a highly publicized study predicting climate change would cost $38 trillion a year by 2049 have retracted their paper following criticism of the data and methodology, including that the estimate is inflated," it stated.Friends of Science (FOS), a non-profit composed of retired scientists which offers insights on climate science, says among those who cited the article, the Network for Greening the Financial System (NGFS) used the data in their climate risk evaluation models..The Office of the Superintendent of Financial Institutions (OSFI) has been a part of the NGFS since 2020 — officially a member since 2021.The OSFI supervises federally regulated financial institutions and pension plans.The FOS wrote an open letter to the Office of the Superintendent of Financial Institutions (OSFI) regarding the retraction.Among the related institutions, the Bank of Canada (BOC) is also an active member of the NGFS..The BOC says the NGFS is "a group of central banks and financial institution supervisors who share best practices and contribute to the development of climate risk management. ""As part of this work, the NGFS is developing an analytical framework for assessing climate-related risks.""Scenario analysis will play a key role in this effort.""The NGFS is developing a standard set of climate-related scenarios for analysis by central banks and others."Additional institutions that use NGFS models include....The Canadian Pension Plan (CPP) Investment Board has used NGFS data, analyzing climate scenarios to "understand potential impacts and asset exposure under different climate trajectories."The CPP says this analysis helps assess macroeconomic shifts on the portfolio, examining GDP and inflation impacts through these models.It is an assessment of risk, "to better incorporate the financial implications in base case underwriting, and to conduct deeper assessments of indirect risk’."As part of the CPP's mandate, they say they invest in " the best interests of CPP contributors and beneficiaries.".Back in 2020, the BOC and OSFI launched their pilot project on climate risk scenarios using NGFS data, however, the retracted article would not have been included, since it was written in 2024.In 2022, the BOC and the OSFI reiterated they would be using the climate scenario analysis models developed with NGFS data going forward, stating:"In the future, it will be important to work toward better data collection on exposures and vulnerabilities and for more institutions to employ scenario analysis.""Future work could consider, for example, physical risks related to climate change, other types of risk, or larger systemic considerations."The pilot project was initially used in 2020 by, to name a few, Manulife, Royal Bank of Canada (RBC), and Sun Life Financial. And in 2024 — when the Governor of the BOC, Tiff Macklem, laid out how their approach aims "to build climate risks into our assessment and outlook for the macroeconomy.".As the FOS highlights, the Kotz et al. article exaggerated its prediction that global GDP would drop 62%, three times greater than previous estimates.However, "other analysts found that when an 'Uzbekistan' anomalous data set was removed, the damage estimates closely paralleled previous, non-exaggerated ones," FOS stated.FOS says as a consequence, "of having NGFS and OSFI promoting an economic climate damage baseline that overexaggerates global economic damage to GDP."
