what is quantifiable is manageable - bank of thailand · • bank’s aim was to show shareholders,...

What is Quantifiable is Manageable:

Bank strategy informed by climate physical risk

modelling drives a smooth transition to the low

carbon economy.

Willis Towers Watson’s Capital, Science & Policy Practice

presentation to the Bangkok Sustainable Banking Forum

© 2016 Willis Towers Watson. All rights reserved.

July 2019


Bank Boards Recognize Both Downside and Upside of Climate: NGFS (Network for Greening the Financial System)

https://www.positivemoney.eu/wp-content/uploads/2018/10/Screenshot-2018-10-16-15.40.54.png

https://www.positivemoney.eu/wp-content/uploads/2018/10/Screenshot-2018-10-16-15.40.54.png


Bank Boards Recognize Both Downside and Upside of Climate: TCFD (Task Force for Climate related Financial Disclosure)

http://427mt.com/2017/02/15/tcfd-recommendations-climate-risk-disclosure/

http://427mt.com/2017/02/15/tcfd-recommendations-climate-risk-disclosure/


Bank Boards Recognize Both Downside and Upside of Climate: Shareholder Activism on Climate


Bank Boards Recognize Both Downside and Upside of Climate: Climate Change and the Cost of Capital in Developing Countries


Bank Boards Recognize Both Downside and Upside of Climate: USD Trillions in low carbon business. Bank on it!

https://media.sitra.fi/2017/02/27052215/dia2-1.jpg

https://media.sitra.fi/2017/02/27052215/dia2-1.jpg


Bank Boards Recognize Both Downside and Upside of Climate: Ultimately it’s Strategy, not simply Risk Management.

https://imperialcollegelondon.box.com/s/k663zgbmvlu6n4kdoqszmfxh8g7pdmtm

https://imperialcollegelondon.box.com/s/k663zgbmvlu6n4kdoqszmfxh8g7pdmtm


To Gain Advantage in Climate You Need:1) Top Leader Sponsorship and 2) Analytics Supporting Strategic decision-making


To Gain Advantage in Climate You Need:1) Top Leader Sponsorship and 2) Analytics Supporting Strategic decision-making

https://www.genevaassociation.org/sites/default/files/research-topics-document-type/pdf_public/ga_risk_modelling_18112018.pdf

https://www.genevaassociation.org/sites/default/files/research-topics-document-type/pdf_public/ga_risk_modelling_18112018.pdf


Physical Risk Quantification Essential to Bank Climate Strategy

https://www.banque-france.fr/sites/default/files/media/2019/04/17/ngfs_first_comprehensive_report_-_17042019_0.pdf

https://www.banque-france.fr/sites/default/files/media/2019/04/17/ngfs_first_comprehensive_report_-_17042019_0.pdf


Example of a Climate Disclosure Engagement

Case Study – Property Owner

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We undertook an analysis of the possible effects of climate change on a Property Owner’s portfolio

using a range of scenarios out to 2100

• Property Owner wanted to understand how physical climate risks could evolve and what would be the potential financial impact to

their business would be. This work was part of their corporate strategy development

• We worked with our Willis Research Network partners to access relevant data and research which informed the development of

scenarios which were then modelled to assess value at risk across Property Owner’s portfolio

• We also helped them to prepare a submission to the Task Force on Climate-related Financial Disclosures (TCFD)

• This work included analysis of transitional risks such as changes in energy pricing and supply, as well as physical risks. We

conducted workshops with Property Owner’s key internal and external stakeholders to gather data points and understand potential

areas of risk exposure

• The project involved collaboration across SRC, CRB, the WRN and the CSP Practice

Case Study – Fortune 500 Bank Mortgage Portfolio

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We are conducting a strategic review of physical climate and natural hazards for a Fortune 500 Bank

mortgage portfolio

• As part of F500 Bank’s Taskforce for Climate-Related Financial Disclosure of physical climate risk, we worked to identify major

risks and particular areas (both sector and geographic regions) of exposure in the bank’s lending portfolio

• Bank’s aim was to show shareholders, investors and other stakeholders that they understand their climate risks and have a

proactive approach to managing and disclosing them

• The engagement is split in to two phases:

• Phase one: Global Peril Diagnostic to quantify BoA’s portfolio exposure to twelve natural perils including terrorism. Working

to analyse another 150,000 in locations such as California, New York and Oklahoma

• Phase two: expected portfolio losses for mortgage, commercial real-estate or oil and gas investment portfolio, to physical

climate risk now and in the future (also including climate change impact) at an aggregate level for a range of return periods

and perils such as windstorm, flood and tornado

• The project involves collaboration across SRC, Investment, HCB, CRB and the CSP Practice

Case Study – Fortune 500 Bank Investment Portfolio

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We are undertaking a climate resilience study for a F500 Bank’s Pension Team which will analyze the

climate risk exposure in their investment portfolio

• F500 Bank’s Retirement Fund want to achieve a better understanding of the potential impact of catastrophe and climate change

risks to their asset portfolio

• The scope of work includes:

• Assisting them with data collection to be used in the Global Peril Diagnostic Tool which will identify the value exposed to

natural hazards across the UK as well as reviewing historic nat cat losses

• Benchmarking of Bank’s RF portfolio to peer portfolio exposures in the same region using the WTW GPD Peril Index

• Production of a modelled loss forecast and calibration of the model to identify climate change impact in the short (up to 2030)

and longer term

• Recommendations for risk mitigation/adaption, including potential transactional solutions

• The project involves collaboration across SRC, Investment, HCB, CRB and the CSP Practice


ESG Integration: Physical Risk Quantification Essential to Climate Finance

https://climatepolicyinitiative.org/2015/02/03/numbers-tracking-finance-low-carbon-climate-resilient-development/

https://climatepolicyinitiative.org/2015/02/03/numbers-tracking-finance-low-carbon-climate-resilient-development/

Corporate Risk and Broking

Human Capital and

Benefits

Benefits Delivery and Administratio

n

Investment, Risk and

Reinsurance

Willis Towers Watson is an integrated advisory, broking and solutions company

organized around four business segments designed to meet our clients’ risk and

people needs

20

Integrated offering around

people and risk

The Capital, Science & Policy Practice at Willis Towers Watson

© 2018 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only.

CSP’s Solutions and Products in Implementation Examples


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Governmental

Agencies

Multilateral

Institutions

Financial Institutions

Corporations

iNGOs

Risk

Consulting

Insurance

Solutions

Climate

Finance

Policy &

Regulatory

Affairs

Science /

Risk

Analytics

Insurance

Development

Forum

Green/Grey

Infrastructure

Protections.

Pandemic

Exposure

Analysis

CCRIF,

PCRIC, ARC

TCFD

Disclosures

Volcano Risk

Modelling



WTW CSP PRACTICE CEO IS ON THE TASK FORCE WORKING GROUP ON DATA, DISCLOSURE AND RISK

what is quantifiable is manageable - bank of thailand · • bank’s aim was to show shareholders,...

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