Fit for climate change with Climate Excellence
PwC Tool “Climate Excellence” for climate scenario analysis
PwC's “Climate Excellence” tool for climate scenario analysis supports investors and companies in getting their portfolios ready for the risks and opportunities of climate change. In this way, the potential for value enhancement, adequate risk management and communication with regulators and stakeholders can be fully exploited.
Climate, climate change and climate protection have long since influenced economic developments. They harbour financial risks that are already becoming increasingly evident in the real and financial economy: From power plants that are no longer operational, to the electrification of individual traffic, to the increasing energy requirements for buildings.
In order to reduce the risks of climate related impacts on the financial market, the Task Force on Climate Related Financial Disclosures (TCFD), which was set up on behalf of the G20 finance ministers, recommends extended reporting by the real and financial economy on climate risks. This is not without reason, as financial experts believe that climate change could put assets worth USD 43 trillion at risk by the end of the century.
Why do you have to act?
As supervisory authorities such as the ECB, PRA, BaFin and regulators increasingly take up the recommendation, e.g. in the ECB Consultative Document on Climate Risk and the Guidelines for Non-Financial Reporting, they are becoming more relevant and are increasingly shaping the risk management and strategy requirements of financial institutions and the real economy.
As a result of the EU Action Plan, the Network for Greening the Financial System and the increasing stakeholder pressure to integrate climate-related risks and opportunities, the question now also arises as to whether companies can retain their "license to operate" and thus prove themselves in the market.
“Climate change is changing our economies. Only those who understand the risks, opportunities and cause-effect relationships can develop sustainable and credible strategies.”
Your requirements
There are many questions you may have regarding climate change and the impact on the companies in your portfolios:
- How will climate risks affect my portfolios in the future?
- How can I protect myself against these risks?
- How do I exploit future potential in my portfolios?
- How do I compare to the competition?
- Among other things, how can I efficiently implement the recommendations of the TCFD, for example the supervisory authorities, and the NBGL in my reporting?
Our offer
The PwC Climate Excellence Tool helps to make climate risks and opportunities transparent and assess them
To answer these questions quickly and reliably and to achieve maximum transparency about your portfolios, PwC offers a climate scenario analysis tool. Climate Excellence enables you to make the financial impact of climate risks and opportunities tangible for your portfolios. The tool quickly and easily analyzes opportunities and risks based on various climate scenarios and energy system models.
Climate Excellence calculates the consequences of specific climate transition risks, such as changing prices, demand, technological advances or regulatory intervention. This enables you to analyze your financial portfolios of up to 40,000 listed securities holistically for so-called climate transition risks. This insight provides you with the relevant information you need to integrate climate risk scenarios into your strategic decision-making processes.
Climate Excellence supports you in the analysis and implementation:
Choose from three different Energy Technology Perspectives (ETP) scenarios of the International Energy Agency (IEA) and discover the different effects of each scenario on your portfolio:
- 2.7 degrees Celsius Reference Technology Scenario (RTS)
- 2 degrees Celsius Scenario (2DS)
- Below 2 degrees Celsius Scenario (B2DS)
Use the detailed descriptions of the scenarios and risk drivers to classify the results of the risk analysis even better.
Climate Excellence shows you the effects on your portfolio in the form of changes in EBITDA or sales in various visualization options. For example, heat maps show you the main risks and opportunities for your portfolios for companies, sectors, regions, over time and scenarios. Single Asset Benchmarks or Single Asset Risk Drivers are further visualization options at company level.
Climate Excellence gives you climate reporting at the touch of a button based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), the Principles for Responsible Investment (PRI), the Carbon Disclosure Project (CDP) and the EU Guidelines on non-financial reporting: Supplement on reporting climate-related information, as well as disclosures e.g. according to the Net-Zero Asset Owner Alliance.
Climate Excellence offers you maximum transparency beyond the CO2 price. It gives you an overview of underlying technological changes, changes in demand and prices and a number of regulatory measures per scenario for the individually desired area.
They develop an understanding of the effects and of winners and losers of the changes caused by climate change. This enables you to conduct informed portfolio management, asset selection and adequate risk assessment and control. These insights can be directly integrated into your existing processes and enable a long-term sustainability strategy.
Your advantages
- The Software-as-a-Service(SaaS) solution can be used immediately and is easy to operate.
- The tool has been tried and tested in the market for years - also in the real economy.
- The analysis covers up to 40,000 listed titles and more than 50 countries as well as a variety of financial parameters - embedded in a global analysis of all economic sectors and unlisted companies.
- The method was developed together with experts from the financial sector and leading academic institutions. More information can be found further down on this page.
- PwC has validated databases on investment structures, technological optimization options and asset/technology costs, increased efficiency, and energy costs.
- PwC's experts draw their knowledge from renowned studies and their own experience from working across countries and studies in many different sectors. In addition, they draw on third-party databases, provided they improve the analysis.
Current and upcoming modules and target groups
The goal of Climate Excellence is to cover all industries and sectors. To this end, various new modules will be published in a fast release rhythm. Currently, the module for asset managers and asset owners, as well as the module for banks have been successfully launched on the market. Our Portfolio Risk Assessment Tool is already suitable for both the financial and the real economy. Next to follow are the modules for the real estate industry, for companies in particular as well as the physical risks module, the module for insurers, for private equity and for whole countries.
On this website and social media, we will provide regular updates on the latest releases. Please contact us if you have any questions.
“Climate Excellence creates transparency in order to understand complex climate-related market dynamics and their effects. This is the basis for actively managing risk drivers and early warning indicators in the company.”
News about the Climate Excellence Tool
- Climate Excellence Tool scores in study on risk analysis of climate change
- PwC supports pilot project in the insurance industry
- The food industry in the spotlight of climate change
- Study on the effects of climate change on the transport and logistics industry
- Webcast recording: Assessing climate-related risks and opportunities
Climate Excellence Tool scores in study on risk analysis of climate change
In July 2020 the ETH Zürich published the study “Taming the Green Swan: How to improve climate-related financial risk assessments.”, in which 16 climate transition risk tools were compared. The assessment focused on two lines of research:
- Descriptive assessment, containing coverage of risk sources and financial assets, their inputs (i.e. underlying climate scenarios), and their outputs (i.e. climate adjusted financial metrics).
- Critical bases analysis, for an in-depth analysis of the quality, comparability and decision-relevance of the tools.
PwC’s Climate Excellence Tool scores top for depth of analysis, and well in terms of coverage, scenarios and metrics. For more information check out the short summary blog of ETH here.
PwC supports pilot project in the insurance industry
PwC is advising a pilot group of the United Nations Environment Programme Finance Initiative (UNEP FI) Principles for Insurance (PSI) on developing methods and piloting a climate risk assessment approach.
This pilot group consists of 22 of the world's leading insurance companies and aims with the project to develop an industry-wide approach for dealing with climate risks and opportunities.
The insurance industry should thereby gain a better understanding of the effects of climate change on its business and develop strategies to deal with this issue methodically.
Further information can be found here.
The food industry in the spotlight of climate change
In a recent survey, PwC examines the food industry from the perspective of climate change. As the results of the global survey show, the industry is particularly exposed to the consequences of climate change − production costs in Europe could rise by up to 30 percent. However, less than half of those surveyed say that they feel the impact of climate risks on their business.
There are two types of risk to be considered: The physical risks, such as long periods of drought or hurricanes, and the transitory risks arising from the reduction of CO2 emissions, for example the increase in the cost of energy and raw materials if a CO2 price is introduced.
Read here how a scenario analysis can help with climate reporting.
Study on the effects of climate change on the transport and logistics industry
Climate change is having an increasing impact on the business models of the transport and logistics industry. A holistic, long-term climate strategy is therefore essential for many to react to regulatory, regional and global developments and to minimize risks. The COVID-19 crisis acts as a catalyst.
The results of the PwC study can be found here.
Webcast recording: Assessing climate-related risks and opportunities
Climate change and its consequences are having an enormous impact on the financial industry, but how do the associated risks and opportunities affect the portfolios of asset managers and asset owners financially? You can watch the webcast here. Have fun and enjoy watching it. If you have any questions, please contact de_info_climate_excellence@pwc.com.
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