C&E Credit Analytics 

The integration of C&E risks into risk management frameworks and business practices constitutes an issue of vital importance which remains top in the agenda of decision makers and regulatory authorities.

Our C&E Credit Analytics team, which forms an integral part of our Financial Risk Management practice, aims to provide insights regarding credit risk implications of climate and environmental risks in order to help the optimization of the decision making process of Financial Institutions.

Our approach relies on Deloitte’s global framework for the measurement and quantification of C&E risks, which represents a scalable and transparent approach covering both transition and physical risks and involves:

• Extensive climate and environmental risk drivers coverage
• Use of multiple scenarios
• Transparency regarding modelling assumptions
• Reliance on publicly available data

Transition risk module represents a multi– step approach along the lines of UNEP FI framework making deliberate modelling decisions and showing the hallmarks of good model design including transparency, proportionality, data leverage and industry best practice.

Physical risk module currently covers flood and heat & drought risk. It involves as a 1st step the development of physical risk maps based on geolocation representations and region dependent administrative meta data and as a 2nd the use of damage functions in order to result to granular insights.

The Framework aims to serve various purposes within a Financial Institution such as:

• Risk Appetite setting
• Lending practices (including credit approval process, pricing, collateral management e.tc.)
•  Internal Stress Testing (ICAAP integration)
• Strategic Steering