SAS Institute Inc. releases report on climate stress testing for banks

The United Nations Environment Programme Finance Initiative and Substation Automation System (SAS) published a joint report offering guidance on climate stress testing for banks and explaining why the topic matters as institutions work to convert climate-related risks into stress testing scenarios.

The report incorporated input from 21 global banks, benchmarked current practices, and identified gaps in modeling, governance and infrastructure; it provided practical advice for folding climate scenarios into core credit risk frameworks and said stress testing helped firms locate vulnerabilities and meet evolving regulatory expectations.

The document described climate stress testing as an assessment of resilience to physical events such as floods and wildfires and to economic effects from shifts toward low-carbon activity and renewables. It said stress testing could reveal weaknesses in loan portfolios, assets and insurance liabilities. SAS outlined its Solution for Stress Testing as supplying a highly automated environment with process transparency, controls and governance, robust data management and auditable results.

“Despite varying policies and requirements across regions, regulators worldwide expect financial institutions to assess and disclose climate risks,” said report co-author Peter Plochan, EMEA Principal Risk Management Advisor at SAS. “This new report from UNEP FI and SAS is an indispensable guide for climate stress testing. Its proven best practices can help banks use technology to identify vulnerabilities, meet evolving regulatory expectations and build resilience into their portfolios.”

“At Banorte, integrating climate risk into our risk management framework is part of our Climate Transition Strategy called MEDIR, which is an acronym for five pillars: Modeling climate risk including advanced physical and transition climate stress testing across multiple scenarios, Greening (Enverdecer in Spanish) our value proposition, Decarbonizing our operations, Integrating climate risk into business as usual and Reporting material climate matters,” said Jorge Granados, Managing Director of Credit and Climate Risk at Banorte.

“full suite of enterprise stress testing solutions allows institutions to manage and govern data, implement and execute models, and establish a controlled workflow for executing regulatory and internal stress tests,” said Chartis Research. “By quantifying potential losses tied to climate-related risks, we help our clients, make our business sustainable and deliver long-term value to our shareholders.” At RiskMinds International, SAS executives discussed Artificial Intelligence (AI), Machine Learning (ML), governance, and financial crime topics.