Climate Financial Solutions
Measuring climate-related financial risks using scenario analysis
How Climate Change and Energy Transition Impact Companies and Markets
Climate change poses significant risks to the global economy and the stability of our financial system, as well as our natural and social environment. The need to minimize industrial emissions to mitigate climate change presents further risks to companies from disruption to traditional business models and energy production. Future climate patterns and the consequences of physical risks are difficult to predict given the dependency on uncertain factors such as population growth, policy changes, technological development, and the stickiness of traditional fuels as we work to balance energy security and a just transition. This shift is creating a new intersection of markets, policy, and sustainable finance, along with a new standard for decision-making: climate risk must be translated into financial outcomes.
Introducing S&P Global’s Climate Financial Solutions
S&P Global’s Climate Financial Solutions translates climate scenarios into financial impact with decision-useful metrics built for financial institutions and investors. Our solutions provide important insights to manage risk and mobilize finance towards risk mitigation, business adaptation and energy transition structured approach to assessing material risks and opportunities.
What challenges do climate financial solutions address?
A quantitative approach can yield new insights and potentially turn risks into opportunities by addressing the following challenges:
Evaluating climate impacts over timescales relevant to counterparty exposures, enabling organizations to anticipate and prepare for potential disruptions.
Adapting to Scientific Advancements: Responding to the ongoing evolution in climate science and low-carbon technologies to ensure strategies align with the latest available knowledge and best practices.
Quantifying Financial Risks and Opportunities:
Measuring climate risks (such as hazard exposures) and opportunities (like energy efficiency improvements) with climate adjusted financial and credit metrics to facilitate informed financing decisions.
Integrating Climate Valuation Impact analysis that translates climate-adjusted financials into forward-looking insights on investment portfolios.
Integrating Stakeholder Perspectives: Incorporating insights from various stakeholders, including investors, regulators, and customers, to ensure a comprehensive understanding of climate-related risks and opportunities.
Decision Useful Financial metrics
Climate Adjusted Financials (CAF)
Three statement financials and derived financial metrics projected out to 2050 tailored to type of counterparty (Corporate, Financial Institution and Sovereign)
Credit Scores and Probabilities of Default (PDs)
Impact of climate on credit risk using S&P’s experience and capabillities on credit risk modeling
Climate Valuation Impact (CVI)
Impact of climate on valuation risk for equities and bonds
Implementation
Key considerations for a robust climate risk analysis
Our Solutions
Tools and resources for conducting climate financial solutions
Analytics that are Fit for Purpose
Datasets that Power our Offerings
Services to Support your Journey
Industry Segments We Serve
Commercial Banks
- Providing climate stress test submissions to regulators
- Aligning loan portfolio to the Bank’s Net Zero strategy
- Setting pricing and credit limits that commensurate with credit risks due to the impact of climate change
- Identifying transition financing opportunities
- Conducting climate financial solutions for the purposes of ISSB or local disclosure requirements
Investment Banks
- Identifying transition financing opportunities
- Identifying potential climate risks and opportunities in potential targets for M&A transactions
Insurers
- Providing climate stress test submissions to regulators
- Conducting climate financial solutions for the purposes of ISSB or local disclosure requirements
Asset Managers
- Quantifying climate risks in portfolios using the Climate Valuation Impact metric
- Identifying investment inclusion/exclusions in portfolios
- Conducting climate financial solutions for the purposes of ISSB or local disclosure requirements
Private Equity and Credit
- Impact to investment valuation across climate scenarios
- Identifying transition financing gaps and opportunities
- Climate financial solutions for the purposes of reporting to GPs/LPs