As businesses consider the impacts of climate change on their long-term sustainability, it has remained difficult to measure such risks - until now. Transition Check, a webtool that takes a scenario-based approach for assessing transition risk and the potential impact of climate change on corporate lending portfolios within an overall framework consistent with the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD). Analysis of previously neglected impacts of physical risk (brought on by the increasing severity and frequency of climate events) and transition risk (arising from the adjustment to a low-carbon economy) is now critical for future planning.
Created as part of UNEP FI’s pilot program, Transition Check incorporates the Central Banks and Supervisors Network for Greening the Financial System (NGFS) reference scenarios and transforms them into relevant impacts for financial institutions.
Thanks to those who joined us virtually to see a demonstration of the tool, and to hear from a panel of experts discuss how climate scenario analysis is being used across the financial sector. Using the "climate credit quality index" derived from the risk factor pathways and the calibration points, Transition Check calculates a new probability of default for all borrowers within a segment based on their starting ratings. Results are summarized at the sector, segment, and borrower level. Transition Check will be freely available to all UNEP FI members.
This event was hosted by UNEP FI and Oliver Wyman who jointly created the webtool and analysis methodology. Transition scenario models used in this tool are provided by Potsdam Institute for Climate Impact Research (PIK) and the International Institute for Applied Systems Analysis (IIASA).