Incorporation of climate risk metrics in Risk Appetite Statement

U Offline

Hi all,

We are assessing the maturity of a client's climate risk program, and looking to understand the extent to which climate risk-related metrics have been formally incorporated in banks’ Risk Appetite Statements

Does anyone have any guidance on:

Whether we’ve seen banks elevate climate risk-related metrics into their Risk Appetite Statement to date; and
If so, what types of metrics have been included (e.g., limits in carbon intensive industries, % of exposure to clients with credit downgrades, borrower-level scoring, etc.)

Thanks

U Offline

I have seen the following:

Percentage of the Business/Institutional portfolio in high transition risk sectors
Proportion of the mortgage portfolio exposed to high physical risks (by 2050 under a 4-degree warming scenario is one specific example). Believe this is based on property level assessment and then some % increase in PD.
Some reputational ones around ESG scores

However, I don’t believe anyone would set the thresholds at a level that would likely be binding. So skeptically, I think this is just for reporting and transparency at the moment – which is probably right given the limitations of climate risk modeling