Climate finance: The challenges and opportunities of financial climate risk modelling and stress testing
The 2015 “Paris Agreement” places a binding obligation on the world’s governments to “Make finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”. Financial institutions are being driven by their regulators, customers, investors, and other stakeholders, to do their part towards transitioning to a low carbon economy and managing exposure to climate-related risks.
This brings challenges to modelling practices across investing, banking and insurance. Unique data sources, new modelling approaches, and extended timeframes — combined with a lack of historical data — are forcing the pace of innovation. Each area, from the temperature alignment of investment portfolios, the stress-testing of loan/bond portfolios, to the modelling of physical risks requires new approaches. As financial institutions widen the scope of their climate-related modelling, what best practices can they learn from each other?
Learning Objectives:
- Hear how financial institutions are sharing best practice to act on climate change and the role of the financial sector in achieving a low carbon and a climate-resilient world
- How to best source and interpret climate-related data, incorporate climate risk stress testing and scenario modelling, and model financial climate risks.
- What can we learn from other sectors as we start to incorporate physical climate risks alongside transition risks into our models?
- How are financial institutions engaging with other sectors and policy makers on climate risks and communicating climate risks to regulators and investors?
Speakers
- Alan Smith Senior Advisor — Climate and ESG Risk Management at HSBC
- Martina Macpherson Head of ESG Strategy and an ExCo Member at ODDO BHF Asset Management & Private Equity
- Stefano Battiston Associate Professor at University of Zurich — Department of Banking and Finance
- Finn ClawsonHead of Risk Analytics at Aviva
- Stuart Theakston Industry Marketing (Finance) at MathWorks
