Library
Climate Risk Modelling Library
A library of method notes on climate risk modelling — physical risk, transition risk, scenario analysis, data methodology, and disclosure expectations.
Start with the climate risk modelling pillar for the overall framework, then use these notes for method detail.
Physical Risk
- Physical Risk and Hazard ModellingModelling acute and chronic physical hazards — flood, windstorm, heat, and drought — and translating hazard footprints into financial loss.
- Spatial Correlation in Climate ModelsWhy spatially correlated hazards dominate portfolio tails, and how to model dependence between locations without overstating diversification.
- Physical Risk for Banks and InsurersHow physical climate risk modelling differs between banking and insurance balance sheets, from exposure data to loss aggregation.
- Climate Risk in Mortgage PortfoliosFlood, subsidence, and heat exposure in real estate and mortgage books, and how hazard maps translate into LTV and loss impacts.
- Tail Risk and EVT in Climate LossUsing extreme value theory to model climate loss tails: threshold selection, GPD fitting, and the pitfalls of short event records.
- Wildfire Risk Modelling MethodsModelling wildfire exposure, ignition, spread, and loss, and why defensible space and construction detail dominate damage outcomes.
- Climate Vulnerability FunctionsVulnerability functions link hazard intensity to damage. How they are built, calibrated, and challenged for different asset classes.
- Drought Risk Modelling MethodsModelling drought as a chronic, slow onset hazard across agriculture, energy, and insurance exposures with index based approaches.
Transition Risk
- Transition Risk Pathways ExplainedCarbon pricing, policy shifts, and technology change: how transition pathways are converted into sector and counterparty level financial impacts.
- Carbon Price Shock ModellingModelling carbon price shocks: pass-through assumptions, sector cost curves, and the credit and valuation impacts that follow.
- Climate Risk in Corporate CreditAssessing climate risk in corporate credit portfolios through sector screening, counterparty analysis, and PD and LGD overlays.
- Transition Risk Shock ModellingPolicy, carbon price, technology, and demand shocks modelled together, then reconciled against existing macro stress scenarios.
- Climate Risk and IFRS 9 ECLIncorporating climate effects into IFRS 9 expected credit loss without double counting shocks already present in macro scenarios.
Scenario Analysis
- Using NGFS Scenarios in PracticeA practical guide to applying NGFS reference scenarios: variable selection, downscaling, horizon alignment, and common calibration mistakes.
- From Scenario Narrative to LossTurning qualitative climate scenario narratives into quantified financial loss estimates without losing the assumptions along the way.
- NGFS Scenarios in Climate ModelsApplying NGFS pathways inside a climate risk model: variable mapping, downscaling, vintage control, and horizon alignment.
- Climate Stress Testing for InsurersDesigning insurer climate stress tests across underwriting, reserving, and assets, with results a board and supervisor can interpret.
- Climate Stress Testing for BanksRunning supervisory and internal climate stress tests in a bank: scope, scenario set, model chain, and the evidence reviewers expect.
Data & Methodology
- Climate Risk Modelling: An OverviewHow physical risk, transition risk, and scenario analysis fit together in a single climate risk modelling framework for banks and insurers.
- Climate Data Sources and ProxiesChoosing between open hazard datasets, vendor catastrophe models, and internal exposure data — and documenting proxies so results stay auditable.
- Climate Risk Data Pipeline ArchitectureHow to structure ingestion, geocoding, hazard joins, and storage so a climate risk data pipeline stays reproducible and auditable end to end.
- Uncertainty in Climate Risk ModelsSeparating scenario, model, and parameter uncertainty in climate risk work, and reporting ranges that decision makers can actually use.
- Backtesting With Limited HistoryValidation techniques for climate risk models where the historical record is short: proxies, analogues, and sensitivity based challenge.
- Building a Climate Risk EngineAn end to end architecture for a climate risk engine: hazard layers, exposure joins, vulnerability, financial translation, and reporting.
- Climate Model Calibration MethodsCalibrating climate risk models without freezing assumptions: recalibration triggers, vintage tracking, and documented parameter choices.
- Climate Risk Data Sources: EuropeEuropean hazard, exposure, and emissions datasets used in climate risk modelling, with notes on coverage, resolution, and licensing.
- Copulas in Climate Risk AggregationUsing copulas to aggregate correlated climate losses across perils and portfolios, and the tail dependence choices that drive results.
- Climate Risk Aggregation MethodsAggregating climate risk across perils, portfolios, and entities without double counting or assuming away correlated outcomes.
Regulation & Disclosure
- Climate Disclosure and RegulationWhat supervisors and disclosure frameworks expect from climate risk models, and how to structure evidence so reviews run smoothly.
- Climate Risk Model GovernanceA governance framework for climate risk models: ownership, validation, documentation, and finding closure that survives supervisory review.
- Climate Risk Dashboards for BoardsWhat belongs on an executive climate risk dashboard: exposure, scenario outcomes, confidence, and the assumptions that would change decisions.
- Climate Risk and Solvency II ORSAEmbedding climate scenarios in the ORSA: materiality assessment, horizon choice, capital implications, and documentation expectations.
- Climate Risk in ICAAP and ILAAPHow climate scenarios enter capital and liquidity adequacy assessment, from materiality screening to documented capital conclusions.