Avantage Reply supported a UK subsidiary of an Asian G-SIB that provides services to both retail and corporate customers to ensure all of its financial risks associated with climate change are identified and managed appropriately across its businesses.
The client requested Avantage Reply to review and challenge the approach adopted by the bank for assessing the financial risks posed by climate change. The engagement included the review of the existing approach to identify, classify and manage climate change risk.
Avantage Reply conducted an in-depth review of the relevant documentation, including ICAAP, Pillar 3 and financial statements, and the detailed assessment of the existing processes and methodologies employed to identify financial risks associated with Physical and Transition risks.
Based on the outcome of the assessment, Avantage organised a structured workshop with relevant stakeholders from the Risk team and other business units. During the workshop, Physical and Transition risks for each sector and lending portfolio were discussed in details and the risk was evaluated based on expert judgement.
The workshop also delved into other associated risks including Operational resilience and Reputational risk of the UK entity.
The outcome of the workshop enabled the client to identify all the potential areas where they have material exposures to climate change risk. For all areas identified as material, appropriate models were agreed to be developed to quantify the risk exposure in the future.