Climate Stress Testing Forum agenda
Day One | Nov 29
8:00-8:50
Registration and breakfast
Day 1 moderator: Scott D. Aguais, Ph.D, Managing Director and Founder, Z-Risk Engine
8:50-9:00
Chairs opening remarks
9:00-9:45
REGULATOR SCENARIO – PANEL DISCUSSION
Reviewing requirements under regulatory scenarios and future expectations for climate stress testing globally
- Bank of England, European and NGFS scenario outline
- Best practice across banking and trading book
- Translation of scenario to capital for organizations
- Leveraging to drive lending strategy
- Limitations of NGFS approach and standardized scenarios
- Developing a standardized framework that adds risk to the scenario
- Evolution of regulatory driven climate scenario
Stephane Dees, Head of Climate Economics Unit, Banque de France
Mourad Berrahoui, Managing Director – Global Head of Counterparty Pricing and Risk Analytics, Lloyds Banking Group
Erica Sassu, Managing Director, Global Climate Risk, Bank of America
9:45-10:20
SCENARIOS
Developing internal capabilities to generate climate scenarios beyond a regulatory exercise
- A history of climate scenarios
- From long-term to short-term scenarios
- Short-term climate scenarios – Spectrum of plausible shocks
- Key challenges in Climate Scenario Analysis
- Scenario choice aligned with use cases
- Scenario customization integrated into the design process
- 3 use cases for scenario customization
Antonio Timoner-Salva, Global Senior Lead Manager Strategic Planning & Stress Testing, HSBC
Lorenzo D’Auria, VP Enterprise Climate Stress Testing, Bank of America
10:20-10:50
Morning refreshment break and networking
10:50-11:25
INTEGRATED APPROACH
An integrated approach for developing climate stress test scenarios: Combining climate-adjusted company-level credit models with detailed industry and region credit risk factors.
- Specifying climate-adjusted credit models to assess physical and transition risks.
- Assessing climate volatility impacts on companies and industry/region systematic credit factors.
- Integrating company-level climate-adjusted PD scenarios with credit factor simulations.
- Applying a flexible climate stress scenario framework to support key bank regulatory and risk management objectives.
Scott D. Aguais, Ph.D., Managing Director and Founder, Z-Risk Engine
11:25-12:00
DATA
Managing complex data requirements to incorporate climate into stress testing models
- Data requirements to incorporate climate into stress testing
- Executing effectively with limited reliable historical data
- Roadblock to building reliable models
- Availability of data for sector differentiation to support analysis
- Reflecting sector differentiation and pathways in models and stress testing
- Bank of England request for sectoral differentiation of results
- Collecting granular data for decision making across portfolios and clients
- Collecting asset level data to identify vulnerabilities
- Converting climate data into financial data
- Identifying data relevant to unique portfolio structures
- Cost benefit and comparative analysis on data
Marc Irubetagoyena, Head of Group Stress Testing and Financial Simulations, BNP Paribas
12:00-12:35
QUANTIFICATION
Quantifying climate risk for IFRS 9: economic, financial, physical, and transition risks
- Quantification of climate, physical and transition risks
- Reviewing quantification approaches for physical risk
- Understanding how organizations translate transition risk into financial impacts
- Impact on stress testing
- Availability and quality of data and data providers
- Challenges for physical risks
- Building transparency into quantification techniques
- Modeling transition risks
- Incorporating secondary impacts into quantification
Chris Kenyon, Global Head Quant Innovation, MUFG
12:35-1:35
Lunch break and networking
1:35-2:10
PHYSICAL AND TRANSITION RISK
Developing innovative methods to incorporate physical and transition risks within stress testing
- Reviewing industry approaches to physical and transition risk. DNB & ECB
- Reviewing top down vs. bottom up approach to transition risk
- Forecasting capabilities with limited historical data
- Modeling and capturing physical risk
- Identifying transition and physical risks for scenario selection. NGFS. RCPs
- Managing intangible nature and challenges measuring transition risks
- Developing robust scenario formulation processes
- Combining internal and external views and resources to tailor scenario
- ESG & IRB models. Strategy. Pros and Cons
Alvaro J. Fernandez Toledo, Sr Lead Validator & Head of Climate Risk Working Group, ING
2:10-2:55
MODELING – PANEL DISCUSSION
Managing complexity of modeling requirements with longer time horizons for climate scenarios
- Merging climate and economical science
- Data requirements for complex modeling
- Ensuring explainability of models for regulatory review
- Modeling time horizons required for climate risk
- Developing forward looking models to forecast climate risks
- Techniques to validate climate risk models
- Ensuring correct dimensions are tested and validated
- Developing consistent modeling and validation approaches
- Identifying deterioration of risks in the future
Sahil Joshi, Director of Stress Testing, Prudential Risk, Macquarie Group
Sebastian E V Werner, Head of Climate Risk Scenario Design, Citi
Vivien Foetz, Sr Lead Validator & Head of Climate Risk Working Group, ING
2:55-3:25
Afternoon refreshment break and networking
3:25-4:00
BAU – FIRESIDE CHAT
Embedding climate risk into BAU and operational decisions with forward looking projections
- Stressing the correct base to ensure accuracy of numbers
- Incorporating climate risk on top of traditional PD and LGD approaches
- Embedding climate risk into existing systems
- Impact of climate risk on PD from a transition risk
- Capturing transition risk and filtering through to PD
- Industry convergence on approaches to capture physical and transition risk
- Impact of wide range of results across the industry
Karen Wilkinson, Global Head, ESG and Reputational Risk, Standard Chartered Bank
James Belmont, Partner, Climate Risk Lead, Baringa Partners
4:00-4:45
CAPITAL & LIQUIDITY – PANEL DISCUSSION
Reviewing approaches for climate stress testing and impact to capital and liquidity stress test
- Reviewing regulatory expectations for holding capital for climate change
- Market risks with public stress test results
- Penalties for banks not adequately prepared for climate risk capital
- Incorporating climate risk within market and idiosyncratic scenarios vs. standalone
- Incorporation within liquidity risk stress tests
- Understanding liquidity impact of climate scenarios
- Developing credible assumptions with evidence
- Defining and calibrating scenarios to understand capital and liquidity impact
- Leveraging internal and external data to validate assumptions
Ying Poikonen, Executive Director – Head of Modeling Group EMEA, SMBC
Doug Baird, Head of Climate Risk Analytics and Pension Risks, NatWest
Aileen Long, Head of Climate Stress Testing & Analytics, Citi
4:45-5:20
RISK ID
Risk identification and long term capture: Climate risk as a risk of the future
- Identifying risks to stress test
- Developing a risk register across portfolios
- Adjusting risk register as changes progress
- Identifying future and prospective risks that may materialize as a result of climate risk
- Reliability for decision making long term
- Diversification and hedging strategies as a result of climate stress tests
- Evolution of knowledge around climate and future regulatory expectations
- Long term considerations for global organizations
Michaela Seimen, Sustainability Expert Client Specialist, UBS
5:20-5:30
Chair’s closing remarks
5:30
End of day one and drinks reception
