Climate scenario
analysis and stresstesting for banks
Decode risk.
Unlock opportunity.

Decode Risk. Unlock Opportunity.

Table of contents
A call to action for banks

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Decode climate risk, unlock opportunity

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Full asset class coverage

3(Climate + Credit) X (Technology)

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Built for CROs, by CROs

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Identify credit impacts

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Climate-conditioned credit insights

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Analyze, act & communicate

5Advisory services

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How Moody’s has empowered banks with climate analytics

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Contact us

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Decode Risk. Unlock Opportunity.

CLIMATE RISK & OPPORTUNITY: A CALL TO ACTION FOR BANKS
The ﬁnancial landscape is evolving, with climate change playing a signiﬁcant role in shaping
the emerging challenges and opportunities for banks. In the last three decades, climaterelated events have resulted in losses exceeding $1.4 trillion, with a notable increase infrequency and severity observed in the past ﬁve years. Coupled with the growing expectations
from investors, regulators, and stakeholders, these trends highlight the importance for banks
to address climate risks and opportunities within their portfolios. However, banks are oftenfaced with the difﬁculty of acquiring reliable climate data and the subsequent challenge oftranslating such data into actionable outputs for credit analysis.

0B

years ofcredit risk
expertise

DECODE CLIMATE RISK, UNLOCK OPPORTUNITY
1B

To help banks navigate these complexities, Moody’s has developed a workﬂow solution that
equips banks with a full view of climate risks and opportunities within their credit portfolio.
This workﬂow offers tailored climate and credit analytics coupled with an extensive
coverage of asset classes to help the Risk function:

115+
30+years ofclimate
modeling
experience→ Conduct climate scenario analysis and climate stress tests.
→ Support portfolio planning decisions and comply with regulations.
The solution combines credit risk expertise with unmatched climate science to quantify theimpact of climate on capital and earnings. This approach enables commercial lenders tomanage risk and identify ‘best-ﬁt’ ﬁnancing opportunities to grow their portfolios.
Comprehensive asset class coverage to analyze the entire portfolio.
This strategic workﬂow allows Risk and Portfolio Managers to analyze and strategically act
on climate risks and opportunities within the credit portfolio. Users can gain anunderstanding of how climate will inﬂuence credit risk, optimize risk proﬁles, and unlock
ﬁnancing opportunities in a changing climate with conﬁdence.
(Climate + Credit) X (Technology) = Comprehensive workﬂow
Moody’s SaaS solution enhances banks’ capabilities by augmenting client data with Moody’s
data to facilitate rich and actionable workﬂows. This marks the advent of a new dimension inrisk and opportunity assessment, tailored to meet the needs of today’s banks.
Built for Chief Risk Ofﬁcers, by Chief Risk Ofﬁcers
The vision is to assist banking CROs – analyze climate-related portfolio losses, act on
the right ﬁnancing opportunities that balance risk-return, comply with regulations.

2B#1

ChartisRanked by Chartis
Research as a category
leader in credit portfolio
management, climate
risk modeling andclimate risk analytics.

Moody’s

3B

200+ perils

Moody’s has over 200 perilmodels enabling banks andother organizations to quantify
the magnitude and probabilityof economic loss fromcatastrophe events.

4B

120+ countries

Over 60 trillion data points and300+ catastrophe models
collectively capture the nearand long-term climate change
risk outlook in more than
120 countries.

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Decode Risk. Unlock Opportunity.

IDENTIFY CREDIT RISK IMPACTS AT COMPANY AND AGGREGATE LEVELS

5B

6B

7B

Translate 1st order effects
of climate hazard into
credit impacts.

Transition scores to identify
segments resilient to policychanges.

Corporate scores, hazard scoresand ﬁnancial impacts at asset
and portfolio level.

8B

9B

10B

Translate 2nd ordereffects of industry trends
into credit impacts.

Translate 1st order effects oftransition to net zero into credit
impacts.

Expansion to climate pathways
and impact on macro-economic
variables.

11B

12B

13B

Aligned to international
climate regulations(IFRS/ISSB and others).

Greenhouse gas metrics
including ﬁnanced emissions,
intensities, green asset ratio.

Integrate into existing ICAAP
framework to calculate RWAs
and assess impacts.

14B

15B

16B

Physical and transition
risk assessment on one
platform.

Leverage an open modelling
framework that incorporates
data from alternative sources.

Delivered by a team of climate
risk experts within a softwareas-a-service workﬂow.

Net zero commitments
tracking and credibilityanalysis.

Produce custom scenarios formore than 100 countries and 10
regional aggregates.

Moody’sUse multiple data sources toleverage climate analytics forcommercial real estate.

17B

4Decode Risk. Unlock Opportunity.

COMPREHENSIVE WORKFLOW FOR RISK & OPPORTUNITY ASSESSMENT

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ENSURE RESILIENCE: STRESS TEST ACROSS KEY ASSET CLASSES
The solution offers extensive asset class coverage and enables banks to conduct climate stress testing.

C&I Loans

CRE Mortgage

Retail Mortgage

PD, LGD, Financials

Emissions, EPC, LTV, NOI

PD, LGD

19B

20B

Retail Non-Mortgage

Residential Mortgage

Bonds

PD, LGD

Property Value, LTV, PD, LGD

Impact on bond values

18B

EquityImpacts on equity
prices21B

SovereignRatings, PD

RISK ASSESSMENT AMPLIFIED BY BEST-IN-CLASS ADVISORY SERVICES
Moody’s climate risk practitioners assess your institutional requirements and recommend the mostrobust climate risk analytics approach for your organization. We help you take ownership of theworkﬂow so you can manage risk-return conﬁdently and take informed steering decisions.

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Decode Risk. Unlock Opportunity.

HOW MOODY’S HAS EMPOWERED BANKS WITH CLIMATE ANALYTICSUS Bank with C&I, Retail, CRE, Capital Markets asset classes→ Requirement
Analysis of climate scenarios across different types of assets
to understand how climate risks, under various scenarios andhazards, can lead to potential losses, at the asset level.
EMEA Bank with C&I, Retail, CRE asset classes→ Requirement
Climate risk analytics and reporting solution to identify andmeasure risks and opportunities related to climate change
under a range of scenarios across different time horizons.
APAC Bank with Bond, Equity, Mortgage asset classes→ Requirement
CSRD-compliant scenario methodology to support analysis
and assessment of the bank’s balance sheet portfolio.
APAC Bank with Retail, Auto Loans asset classes→ Requirement
Development of ESGC risk management framework including
risk identiﬁcation, quantiﬁcation, integration into existing
ICAAP & stress testing processes.

A FORWARD-THINKING APPROACH
Moody’s workﬂow solution elevates your risk management framework by incorporating forward-looking climate
metrics – spanning physical and transition risks – into your risk assessment. The solution enriches your credit
portfolio management by offering nuanced insights, empowering your decision-making with a future focused lens onclimate risk and opportunities.

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Decode Risk. Unlock Opportunity.

For more information on how to capture climate risks
and opportunities in your credit portfolio
VISIT OUR CLIMATE WEBSITE
WWW.MOODYS.COM/CLIMATERISKVISIT OUR CREDIT PORTFOLIO MICROSITE
WWW.MOODYS.COM/PORTFOLIOSTUDIOAMERICAS

EMEA+1.212.123.4567
clientservices@moodys.com+44.20.1234.5678
clientservices.emea@moodys.com

ASIA (Excluding Japan)

JAPAN+852.1234.5678
clientservices.asia@moodys.com+81.1234.5678
clientservices.japan@moodys.com

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