Navigating climate risk for resilience and growth
Unlocking Net Zero Opportunities in Lending
Unlocking Net Zero Opportunities in Lending
Explore how lenders can benefit from adopting a multi-level approach to counterparty climate risk and opportunity assessment to overcome key challenges and spur the Net Zero transition.
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Explore Moody’s on Climate for Banking
Explore Moody’s on Climate for Banking
Understanding the interconnected risks of climate change.
Overview
- Climate Risk
- Solutions
- Events
- Capabilities
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Climate Risks & Opportunities for Banking
Through Moody’s climate solutions, banks can manage climate-related risks and uncover opportunities across their organization with a consistent and meaningful view of physical and transition risks. Moody’s offers insights into the impact climate change has on the interconnected challenges across lending, risk, and finance departments. With our robust and trusted climate risk data and analytics, our solutions can help banks prepare and respond to constantly evolving regulations as well as customer and shareholder demands and across all asset types.
Understand Risk, Identify Opportunity
Physical Risk
Transition Risk
Integrated Risk
Physical Risk
Climate Change perils (e.g., flooding, hurricane, wildfire, drought and heat stresses)can directly impact credit and investment values. Moody’s provides tools to quantify financial risk, offering a detailed perspective on climate change in lending and investment decisions.
Transition Risk
An evolving regulatory landscape, shifting customer preferences, and advancements in technology, make compliance and reporting more complicated in banking. Moody's stress testing and scenario analysis tools enable assessment of transition risk under different scenarios to build resilience and help identify new opportunities.
Integrated Risk
Climate change is a structural trend demonstrating the interconnected and compounding impacts of risks that should be managed throughout the banking business lifecycle. Moody’s integrates climate risk data and analytics throughout its core software, providing a unique perspective and understanding across all scales in future climate scenarios reflecting both physical and transition risks.
Translate Climate Risk into Banking Relevance
Bank resilience and growth potential depends on a comprehensive view of risk, which informs and supports risk management strategies. Climate change presents physical and transition risks with a direct impact on credit worthiness and likelihood of default for credit exposures. Effective management of climate risk requires its integration throughout existing workflows as a dimension of overall risk for banks.
Loan decisioning
Moody’s incorporates data and insights on impact of climate risk on new loans, track changes in default potential, monitor loan performance, and identify green financing opportunities.
One way in which Moody’s enables the integration of climate risk in loan decisioning is with climate risk assessment functionality in our flagship credit lifecycle management platform, the CreditLensTMsolution. The integration enables lenders to assess the impact of climate on their customers’ credit quality to inform lending decisions. Banks can weigh the impact of climate risk on their credit decisions and identify relevant opportunities without increasing workload or disrupting the work process.
Portfolio planning and stress testing
Moody’s helps with planning for internal carbon transition across asset classes with analysis of financed emissions, physical and transition risk modeling for stress testing, and understanding vulnerabilities for capital planning and portfolio concentrations. Our solutions are flexible to meet your team’s needs with data, models, and analytics designed to seamlessly integrate into existing workflows.
PortfolioStudioTM
Climate and ESG Module is an example of the capability we bring to banks to enhance risk assessment for portfolio and risk manager. The module allows its users to assess climate impact on credit performance and enables Climate and ESG reporting for credit portfolios. With the Climate and ESG Module, PortfolioStudioTM customers can unlock a holistic view of risks and impacts.
Climate risk disclosures and regulations
Moody’s helps risk managers with their portfolio compliance guidelines, net-zero targets, and identify adaptation and resilience opportunities including those specific to the material physical risks identified through our modeling tools.
Climate change regulation and disclosure requirements are rapidly evolving and region-specific. For example, in Europe, executed EU banking regulations and ECB expectations are creating new challenges and opportunities specific to lending and risk management. In the US, while the policy landscape is less mature, preliminary exercises such as the Federal Reserve Board’s Climate Risk Exposure Stress Testing set the stage for future regulatory mandates. Under these increasing worldwide regulatory and market pressures, forward-thinking financial institutions are looking to incorporate climate risk into their workflows with consistency.
Uncover The Importance of Integrating Climate Risk Analysis Across the Enterprise
The financial costs and impacts of climate change
Join Moody’s for a virtual round table discussion to explore how modeling the physical risks to your real asset portfolio can help your teams evaluate potential costs from damages and business disruption plus the implications of changing perceptions on insurability due to climate change.
Watch On Demand
Explore EU Banking Regs & ECB Expectations
EU Banking Regulations and ECB expectations on Climate Risk are creating new challenges and opportunities in lending. Access an overview of the most recent regulations and guidance. Hear a discussion on how climate risk data and modeling offers new insight into regulatory-driven risks and opportunities specific to European banking.
Explore Moody’s Related Banking Capabilities
Moody’s is investing in solutions to help banks better understand and measure the impact of climate risks across their business.
Foundational Education & Training
A shared understanding of climate risks is key to shaping and executing an organization-wide strategy. An example of our Climate curriculum is the course The Principles of ESG and Climate Change Fundamentals, which introduces the concepts, issues, and regulatory frameworks all financial service professionals should be familiar with.
Credit Assessment & Scoring
Advanced analytical models and objective credit ratings can greatly enhance the quality of credit decisions by facilitating your risk assessment of the borrower. Our solutions allow you to use either your own proprietary models or our award-winning credit scoring models that have been built on our unparalleled experience with credit evaluation.
Credit Implication Analytics
Our EDF-X platform combines Moody’s Analytics award-winning risk models with the world’s largest company database to help you reliably assess the credit risk of rated and unrated, public and private companies globally – with greater speed and precision.
Physical Risk Modeling
Climate on Demand provides foundational insight through rigorous data and analytics that define current and forward-looking location-specific threats to real assets from climate-related event damages and business disruption.
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Portfolio Management
PortfolioStudio™ Climate and ESG Module enhances risk assessment for portfolio and risk managers, offering a comprehensive view of risks. It incorporates Climate and ESG data and analytics, including climate-adjusted PD and scenarios.
Awards
RESEARCH & INSIGHTS
Curated Research & Insights on critical dimensions of climate risk and opportunity for banking.
VIEW ALL RESEARCH AND INSIGHTS
Back To Start
White paper
Unlocking Net Zero Opportunities in Lending
Explore how lenders can benefit from adopting a multi-level approach to counterparty climate risk and opportunity assessment to overcome key challenges and spur the Net Zero transition.
Read More
link
Report
Banking-Global: Enhanced climate change reporting will support risk management
Climate risk disclosures by big global banks have increased over the past three years, but they still do not report in detail on how climate change might affect their financial performance.
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link
Article
Climate Impact on Mortgage Credit Losses–A Portfolio Example
Mortgage lenders, servicers and regulators are becoming increasingly aware of the credit risks associated with severe weather events brought on by climate change. Loss models have traditionally considered two main factors of credit risk: the profile of the borrower—credit history, leverage, property and loan type—and the economic cycle.
White paper
Climate Risk Impacts on a Lending Portfolio; Loan-level Analytics
The ongoing discussion and analysis of climate risk and financial system stability has included a number of climate risk trials, case studies, and experimental stress tests. To date, none of these have been comprehensive in terms of the portfolio volumes and industry sectors typically held by mid-market banks, and only a few have attempted to aggregate the financial impacts to show typical bank performance or risk metrics. This analysis does both.
White paper
Uncovering Climate Hazard Concentrations in Loan Portfolios: A Case Study
New sources of concentration risk in loan portfolios stem from the exposure of counterparties and their facilities to climate hazard events. Traditionally, these exposures have not been captured by standard systemic risk factors in credit and market risk models.
Sign up today for Moody's on Climate for Banking events.
TALK TO AN EXPERT
Incorporate climate risk into loan decisioning, portfolio planning, stress testing, and regulatory compliance and reporting. Contact us today to demo the portfolio of Moody’s Banking solutions bolstered by seamlessly integrated climate risk data and insights.
