The views and opinions expressed in this article are those of the thought leaders as individuals, and are not attributed to CeFPro or any particular organization.
By Sophie Dupre-Echeverria, Chief Risk & Compliance Officer, Gulf International Bank
What are some ways an organization can invest in quantitative ways of assessing risk?
Firms increasingly have access to a wide range of data and tools across climate risk and ESG. The major development recently has been the provision sophisticated climate change-related credit and market risk models. For example, credit risk analysis vendors have integrated climate change risk in their probability of default estimates.  Importantly, these models can therefore be used for internal credit rating and stress testing of the credit portfolio as part of ongoing risk management and internal capital adequacy assessment. Similarly, some market risk analysis vendors have integrated climate change transition and physical risk as a new risk factor in their VaR and volatility models. Those models can be used to estimate potential losses due to climate change on trading and investment portfolios.
