Solution overview

•EY Climate Stress Testing helps banks evaluate the transition risk of their loan portfolio by:

•Leveraging a spectrum of Network for Greening the Financial System (NGFS) scenarios, sector-specific, and obligor-specific data

•Performing sector-specific modeling of transition risk and estimating the financial impact across the balance sheet, income and cash flow statement of counterparties

•Measuring the impact on key risk metrics such as Probability of Default (PD), Rating Migrations (RM), and Capital Adequacy Ratio (CAR)

•Evaluating the impact of transition risk on the portfolio and providing valuable insights to the Banks to inform their overall decarbonization strategy, mitigation actions and balance sheet concentrations

Solution benefits

•Enhance capabilities, processes, and governance at speed and scale to integrate climate risk into the decision-making and portfolio management process and respond to growing disclosure requirements

•Identify market opportunities while minimizing downside risk from carbon intensive sectors, considering government policies and other local factors

•Respond to growing external pressure from regulators, shareholders and stakeholders to meet and exceed climate risk management regulations and standards

•Facilitate decarbonization of FI clients, supporting transition plan and increasing enterprise resilience to climate-related risks

EY Climate Stress Testing / Scenario Analysis solution

by EY Global