Climate Stress Testing and Climate Scenarios

Climate Risk Stress Testing evaluates how climate-driven disruptions might affect credit risk at the individual loan level. Given emerging forecasts that suggest an increased likelihood of environmental tipping points, it is a crucial tool for finance professionals seeking to assess potential threats to the financial system's resilience under severe stress conditions. By understanding the impacts of climate-related disturbances on financial stability, institutions can better identify strategies to enhance systemic robustness.

Participants will delve into the key elements driving climate scenario analysis within financial institutions, the primary scenarios utilised, and the main methods employed by financial institutions to conduct climate stress testing at the loan level.

The course also provides an overview of the main data used to represent climate shocks, which in the financial context are typically categorised into two main types. Firstly, transition risks arise from changes prompted by climate policy, regulation, or the overall shift towards decarbonisation across sectors. Secondly, physical risks pertain to the tangible effects of climate change, such as extreme weather events and other environmental hazards. Physical impacts can affect collateral directly or spread indirectly through economic contagion.

• Overview of the main scenarios for transition risk
• Overview of the main datasets available for physical risk
• The main methodologies of stress testing (bottom up and top down)

This specialised online course is tailored for credit risk modellers, senior risk managers, and financial professionals aiming to enhance their understanding of climate scenario analysis and climate stress testing. It will provide participants with the strategic insights and practical tools necessary to integrate climate-related financial risks into credit risk models, and to steer their institutions through the increasing regulatory and market expectations regarding climate risk management.

There are no specific entry requirements for this course