Climate RiskGauge
Undertake a Market-Valuation Approach to Assess the Impact of Climate-Related Risks
Climate RiskGauge estimates the financial impact of climate transition and physical risks by looking at a compact set of financials, and projected emissions, as well as a firm’s implied market capitalization, to arrive at the estimation of a credit score change1 over a given time horizon for public and private companies.
1S&P Global Ratings does not contribute to or participate in the creation of credit scores generated by S&P Global Market Intelligence. Lowercase nomenclature is used to differentiate S&P Global Market Intelligence credit model scores from the credit ratings issued by S&P Global Ratings.
We Support
- The Task Force on Climate-related Financial Disclosures’ (TCFD) recommendations on forward-looking scenario analysis.
- Climate-related stress testing that regulators are increasingly expecting from financial institutions, at both a single counterparty and portfolio level.
Incorporation of climate related risks into credit-related policies, procedures, strategies and overall risk appetite of a financial institution.
Climate risk-adjusted valuations of companies for the purpose of capital markets issuances, mergers and acquisitions and other types of corporate financing and investment activities.
Key Features of Climate RiskGauge
Optimized, Lean Approach
Each of these exposure types are covered by distinct models that are optimized for relevant data requirements enabling efficient portfolio- level analysis and wide coverage.
Wide Spectrum of Asset Classes
Covers a variety of asset classes, including corporates and financial institutions, and expanding to include several more in the future.
Variety of Scenarios
Incorporates a variety of scenarios making it suitable for both stress testing and reporting requirements across multiple jurisdictions, globally.
A climate scenario analysis tool for niche asset classes
Climate RiskGauge leverages S&P Global Trucost’s database of company-specific Scope 1 and 2 emission details, physical risk scores of companies and company pledges to transition to provide an optimized assessment of climate impact on exposures to:
- Financial institutions with a focus on financed emissions and macroeconomic impacts for banks, investment managers, specialized financial institutions and diversified financial institutions. Future climate-adjusted assets and liabilities are generated, along with various debt metrics and climate-adjusted Probability of Defaults (PDs), Loss Given Defaults (LGDs), Exposure at Defaults (EADs), and Expected Credit Losses (ECLs).
- Real estate that examines physical risks, green certification and macroeconomic factors, such as the House Price Index and interest rates, plus loan-level impacts on commercial mortgage loans and residential mortgage loans. Relevant financial metrics are generated, such as the impact on loan-to-value, plus climate-adjusted PDs, LGDs, EADs, ECLs.
- Sovereigns that cover issuer- and issue-level impacts on sovereign issuers and sovereign bonds and generate relevant financial metrics, such as sovereign liabilities, assets and yield, plus climate-adjusted PDs, LGDs, EADs, ECLs.
Aligned to Renowned Agencies/ Associations
Climate RiskGauge enables users to select from a wide range of scenarios.
- It has the flexibility to align with the scenario values from both the International Energy Agency (IEA) and the Network for Greening the Financial System (NGFS).
- A user-defined scenario applying a global carbon price risk premium, where the severity of the overall tax increase from current levels is assumed to be independent of the industry sector, the geography, and the time horizon.
- The tool is also regularly updated to reflect the continued evolution in climate-related risk trends.
Climate RiskGauge is delivered via S&P Capital IQ/Market Intelligence Excel® templates, which help automate financial spreading and provide easy integration, as these are not dependent on any specific technology.
Extensive Climate Coverage
Trucost’s database currently stores the history of reported and estimated Scope 1 (direct), Scope 2 (indirect) and Scope 3 (supply-chain related) carbon emissions for more than 15,000 companies globally, since 2005, including emissions from fuel combustion, company vehicles and fugitive emissions.
Sustainable1’s information on more than 3 million physical assets’ geographical locations, with financial impact aggregated at the company level from 7 physical hazards, modelled for various climate scenarios. These scenarios are harmonized with those from NGFS. The overall physical risk impact includes both implications at GDP and company-level.
An optimized set of financial inputs from Capital IQ Pro enabling vast company-level coverage, including 45,000+ public companies (financial and non-financial) and several million private companies across industries.
Climate Risk Insights
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