Banking

Your expert for questions

Urata Biqkaj

Urata Biqkaj
Manager, PwC Germany
Tel: +49 69 9585-6884
E-Mail

Your concern

What climate change means for banks

From the EU Action Plan to the Carbon Disclosure Project and the Principles for Responsible Investment (PRI), the financial industry is increasingly regulated. All regulations have one thing in common: they require financial institutions to systematically integrate scenario analyses into existing processes in order to test the resilience of the business model. For asset managers and asset owners, the question is not only how to comply with these regulatory requirements. They also face the task of translating the financial implications of different climate scenarios into their risk and opportunity management and understanding their material drivers.

Climate Excellence enables you to translate the financial implications of different climate scenarios into risk and opportunity management and understand their material drivers.

Banks face these questions in the context of sustainable finance

  • For which existing loan portfolios is the financial materiality of climate risks highest?
  • What insights can be derived from this analysis in terms of opportunities and risks from climate change?
  • How do risks and opportunities differ across different scenarios?
  • How can the risks and opportunity be explained?
  • What are the key drivers of performance based on a holistic modeling approach that looks at more than just CO2 prices?
  • Are these drivers based on sectoral or regional positioning or are the results strongly influenced by individual companies?

Our offer

What Climate Excellence offers banks

  • Climate Excellence enables banks to use the scientifically and internationally recognized scenarios of the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA).
  • Content coverage:
    • Banks can currently choose from three transition scenarios and two physical scenarios. These will be added to and expanded on an ongoing basis.
    • The module for banks covers all sectors based on common industry classification systems.
    • The module provides botttom-up analysis based on the individual business activities of all firms in the portfolio and subsequent reportable aggregation levels. Breaking down to individual asset level is possible.  
  • The module can be used to analyze the adaptive capacity of companies in the portfolio to climate change along three pathways.
  • Holistic modeling: Climate Excellence for Banks supports consistent scenario modeling that goes beyond the CO2 price. For example, energy demand and mix as well as sector-specific technology requirements are also analyzed, taking into account price developments.
  • Optimization of loan portfolio coverages through multi-step process: 
    • Company-specific analysis for 70,000 companies. This includes all globally listed companies as well as any companies in the sectors covered by Asset Level Data sectors.
    • Flexibility in identifying companies via name search, legal entity identifier or ISIN.
    • Alternatively, we analyze climate-related impacts based on a sector-geography matrix.
  • Outstanding development platform: SAP provides a high-performance, secure, cloud-based environment that supports interfaces to SAP's own and other user-specific systems.

Your benefits

How banks benefit from Climate Excellence

  • Use of qualitative and quantitative outputs for cross-functional integration of climate risks in the company
  • Implement climate scenario analysis in line with the best practice recommendations of the Taskforce for Climate-related Financial Disclosures (TCFD)
  • Use the results to adapt sector strategies

Climate Excellence provides banks with answers to these questions

  • Materiality analysis: How do we quickly get an overview of the materiality of quantitative and qualitative risks along different time horizons?
  • Climate strategy and business unit development: How might market demand, technological opportunities and regulations change in the future?
  • Risk management: what implications can be derived for the credit portfolio or investment portfolio based on the analysis?
  • Credit portfolio management and development: how would this impact my business, value chain, portfolio, customers and products?

Climate Excellence shows the financial impact of different transition scenarios down to enterprise levels at the push of a button:

Overview: Get an overview of the total climate-related financial impact on the credit portfolio, answering the question of the financial materiality of the scenarios on the portfolio.

Heatmap: Deepen your understanding of the hotspots in your portfolio. This allows you to quickly prioritize for further, deeper analysis. Hotspots can be displayed by sector, region, and in combination. It is also possible to break down the analysis to individual companies that are driving the results.

Heatmap

Single-asset view: which technologies, subsectors and regions are the most significant drivers of climate-related financial performance for an individual company? This can be broken down to activity driver level in Climate Excellence. Use these insights to target climate-specific issues into your credit selection process.

The next expansion stage links this quantification with a qualitative scenario narrative. This gives you all the information you need at a glance.

Contact us

Urata Biqkaj

Urata Biqkaj

Manager, PwC Germany

Tel: +49 69 9585-6884

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