Climate Risk

Data is the driver

ON Climate is a SaaS application that was developed by our team of credit scientists and software engineers, in close collaboration with 10 US banks and 27 climate experts. ON Climate enables banks to make faster and smarter decisions on which borrowers or sub-sectors in the portfolio are most likely to suffer or benefit from climate change, and as a result, mitigate risk and identify origination opportunities to lend more. Banks can easily run robust and dynamic analysis to determine climate impact and emissions using existing borrower datasets. ON Climate overlays six climate scenarios on 14+ borrower data points, that can be readily extracted from spreading and core banking systems, to provide a forward-looking climate risk score from low priority (least vulnerable) to high (most vulnerable).

Transition risks

Transition risks can arise from the process of adjustment towards a low-carbon economy. A range of factors influence this adjustment, including climate-related developments in policy and regulation, the emergence of disruptive technology or business models, shifting sentiment and societal preferences, or evolving evidence, frameworks, and legal interpretations. The ON Climate solution identifies the borrower level impact metrics that influence the revenue and costs, along with policy driven impact for borrowers, and uses those to project the future financial health and potential risks their business may face.

Physical risks

Physical risks include extreme, localized events such as floods, fires, hurricanes, and heat waves as well as chronic changes in climatic patterns such as rising temperatures, change in precipitation, increasing sea levels and desertification. ON Climate’s physical risk assessment will evaluate how extreme weather events can lead to business disruption and damage to property. It will also address how long-term changes in climatic patterns can affect labor, capital, and agricultural productivity.