Climate risks are expressed in a wide variety of ways, and by a diverse number of bodies. A data mapping solution is required to rationalize these bodies.
Climate pathways themselves originate from The Intergovernmental Panel on Climate Change (IPCC), which is an international group of scientists, mandated by the UN who look at every aspect of climate change, reporting on environmental tipping points and changes that are likely to occur as a result of increasing levels of carbon dioxide in the atmosphere. These pathways describe the routes that must be taken to achieve the limits on global warming specified by each. The warming limits are expressed as increases in average global temperatures, by 2100, as compared to pre-industrial levels. Any data mapping solution must be able to include the IPCC.
The main pathways considered by the IPCC correspond with determinations made at the Conferences of the Parties (COPs), where government representatives from around the world meet to decide global responses to climate change and affirm their specific countries’ commitments and goals. Included in the list of ‘main’ pathways are the 1.5 and 2-degree pathways, being the hope and committed goal, respectively, of the world’s governments, as well as the 8.5 degrees (or Hot House World scenario), which represent a ‘business as usual’ approach.
Governments then make their own specific commitments, that sit alongside the ambition of the overall COP. These regional plans are therefore related to both the overriding pathway and the adaptation policies called for as a result of each jurisdiction’s current and expected climate change experience.
The climate policies from the IPCC are then monitored by the International Energy Agency, and reported against at regular intervals in their progress reports. A third agency, the Network for Greening the Financial System (NGFS) puts costs against the pathways and policy commitments.
Taken together, these sources provide the basic input for economic scenarios to be mapped into the GreenCap system and subsequently used as the basis for the analysis into recalculating the Risk-Weighted Asset (RWA) of each loan or credit facility. This mapping is performed by GreenCap’s data mapping service and made available to GreenCap users.
Of course, the initial mapping must be constantly tweaked and updated to respect progress through pathways, new science, and changing priorities at regional governmental level. This is also done by the GreenCap data mapping service on a base and consultative basis.
The ultimate goal of the GreenCap system is to show the cost to the portfolio, on a loan by loan basis, of climate change, and to juxtapose that result with the carbon intensity numbers across the same book. The data mapping analysis from the bank’s Scope 3 carbon audit is also a service offered by GreenCap.