Company: BCS
Filing Date: 2025-02-13
Form Type: 20-F
Source: 0000312069-25-000114
Chunk: 121

Company: BARCLAYS PLC
Filing Date: 2025-02-13
Form: 20-F
Chunk 121
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 yield greater impacts, notably as customers begin to price energy performance more explicitly in their decisions. However, the resultant impact on annual profits remain manageable. For our Unsecured portfolios, the resultant GDP trajectory of the scenario notably gives rise to higher unemployment rates across Barclays&#8217; major operating geographies, with negative impacts on consumer affordability through the loss of jobs and a weakened macroeconomic environment. Nevertheless, Barclays remains resilient and current risk management practices for these macroeconomic factors are sufficient. Results from the exercise have been integrated into Barclays' internal capital adequacy assessment process to ensure Barclays remains sufficiently capitalised to both climate and macroeconomic stresses. We acknowledge however that further advances in modelling capability and data availability are needed. For example, the scenario does not capture compounding and interaction effects between physical and transition risks that could potentially amplify such losses. As such, Barclays' annual stress testing cycle is in place to better our understanding, by testing our business under different climate scenarios, to continuously enhance our methodologies. Reverse Stress Test A climate-based Reverse Stress Test was conducted during 2024 with the objective of understanding specific extreme climate events that would make the Group&#8217;s business model no longer viable. The exercise considered a breakdown of the insurance/re-insurance market following heightened physical risks over a longer period going into 2040, along with elevated financial stress of customers and clients unable to transition within this timeframe. The narrative was designed internally (with reference to the IEA&#8217;s Announced Pledges Scenario (APS)). The associated climate events position the world in 2040, where economies have transitioned in line with APS, however the transition is uneven and fragile, leaving many companies and sectors unable to adjust and therefore still highly vulnerable to transition risks. In this context, while the world has significantly reduced its reliance on fossil fuels, certain segments of the economy were unable to reduce their carbon footprint and use of fossil fuels for electricity generation continued due to higher demand for electricity. In this scenario, we assumed that the clients with slow and delayed progress on their transition plans and lower credit worthiness to be most affected. For physical risk, the narrative considered increased frequency and severity of physical perils leading to consecutive years of losses in the insurance industry. Heightened secondary perils (more frequent, but with lower severity, such as flooding and wildfire), would lead to repeated loss claims, leading to significant shifts in the insurance industry and adjustment of their risk appetite, reducing insurance availability in the areas most exposed to physical risks. Additionally, it was assumed that governments do