Creating a Climate Risk Roadmap for a Multinational Bank

The client needed to develop climate scenario analysis models integrated with IFRS9 ECL models and stress testing for priority sectors and make required adjustments their existing models including Regulatory Capital Models (IRB), Market Risk Models, and Counterparty Credit Risk (CCR) Models.

Solytics provided a phased approach:

1. Develop climate scenario analysis models, integrate them with IFRS 9 ECL models and stress testing models for Priority 1 sectors – Power, Oil & Gas, and Sovereigns.
2. Expand to Priority2 sectors – CRE, Steel, Mining, Transport – Aviation, Transport – Shipping,Transport – Road Transport / Automobiles & Components.
3. Assess LTV impacts on Retail Mortgages and CRE from Physical Risk hazards.
4. Adjust including Regulatory Capital Models (IRB), Market Risk Models, and Counterparty Credit Risk (CCR) Models.

• Enhanced climate riskmodels as per regulatory guidelines.
• Improved prioritization of the various sectors considering their materiality on the overall loan book.
• Recalibration of IFRS9 ECL scenarios to adjust for climate risk considerations.
• Recommended separate models
• Provided a comprehensive roadmap for future climate risk adjustments.