Build a sector and geography heat map covering acute physical, chronic physical and transition risk factors.
Finance & Banking
Assessing Physical and Transition Climate Risk in Bank Lending Portfolios
Learn to map physical hazard and transition risk exposure across a lending book, run scenario analysis, and feed results into credit decisions.
🗓️Duration5 training days
📚Content4 modules · 8 sessions
🎓On completionAccredited attendance certificate
About the programme
Course Overview
Climate risk stopped being a disclosure exercise once supervisors began asking banks to show how physical hazards and the transition to a lower-carbon economy show up in credit losses, collateral values and sector concentrations. This course builds that link directly. Participants learn to run a heat-mapping exercise that scores sectors and geographies for acute physical hazards such as flood and wildfire, chronic hazards such as heat stress and water scarcity, and transition exposure driven by carbon price, policy and demand shifts. The course works with recognised scenario families, including those published by the Network for Greening the Financial System, and shows how to translate a scenario narrative into shocks that a credit or collateral model can actually use. Delegates practise assessing physical risk to specific collateral types such as commercial property and agricultural land, and transition risk to specific sectors such as power generation, cement and road transport, then combine both into a single exposure view for a sample lending book. The course closes with the harder question of what to do with the results: how climate risk factors feed into risk appetite, sector limits, covenant design and pricing without either ignoring the signal or over-engineering every loan decision around a long-dated scenario.
Expected Learning Outcomes
Select and apply an appropriate climate scenario family to a lending portfolio assessment.
Translate a scenario narrative into shocks usable in credit risk and collateral valuation models.
Assess physical hazard exposure for specific collateral types including property and agricultural land.
Assess transition risk exposure for carbon-intensive sectors using policy, price and demand pathways.
Combine physical and transition risk views into a single portfolio exposure assessment.
Translate climate risk assessment results into risk appetite limits, covenants and pricing adjustments.
Who Should Attend
Credit risk managers responsible for sector and portfolio risk assessment
Climate risk and ESG specialists working inside risk or finance functions
Relationship managers lending into carbon-intensive or climate-exposed sectors
Collateral and valuation teams assessing property and land exposures
Regulatory reporting teams preparing climate stress testing submissions
Portfolio strategy staff setting sector limits and lending appetite
Course Modules
Select any module to see its sessions and points.
01Mapping Physical and Transition Exposure
2 sessions · 8 points
Session 1Physical Hazard Identification and Heat Mapping
- Distinguish acute physical hazards such as flood, storm and wildfire from chronic hazards such as heat stress and water scarcity.
- Build a geography-level heat map that scores physical hazard exposure by hazard type and time horizon.
- Overlay portfolio concentration data onto the heat map to identify where exposure and hazard intersect.
- Assess data quality limitations in physical hazard datasets and how they affect confidence in the heat map.
Session 2Transition Risk Drivers by Sector
- Identify transition risk drivers including carbon pricing, regulatory policy, technology shifts and demand changes.
- Score sector-level transition risk exposure for carbon-intensive industries such as power, cement and transport.
- Assess counterparty-level transition readiness through capital expenditure plans and stated decarbonisation targets.
- Distinguish orderly, disorderly and delayed transition narratives and their differing effects on sector risk.
02Scenario Analysis and Quantification
2 sessions · 8 points
Session 1Applying Recognised Climate Scenarios
- Select an appropriate scenario family, including NGFS scenarios, for a given time horizon and risk question.
- Translate a scenario's macroeconomic and sectoral variables into shocks usable in a credit model.
- Apply short-term and long-term scenario horizons appropriately to lending versus long-dated project exposures.
- Document scenario selection rationale so results can be defended to supervisors and internal risk committees.
Session 2Quantifying Impact on Credit and Collateral
- Estimate the effect of a physical hazard shock on collateral value for property and agricultural land exposures.
- Estimate the effect of a transition shock on borrower cash flow and probability of default for exposed sectors.
- Combine physical and transition impacts into a portfolio-level loss estimate under each scenario.
- Identify exposures where combined physical and transition risk compounds rather than simply adds.
03Embedding Results into Credit Decisions
2 sessions · 8 points
Session 1Risk Appetite and Sector Limits
- Translate heat map and scenario results into sector concentration limits within the overall risk appetite statement.
- Set early warning indicators that flag deteriorating transition readiness within an existing sector exposure.
- Calibrate limits so they constrain genuinely high-risk concentrations without blocking transition finance opportunities.
- Review limit calibration periodically as scenario data and sector pathways are updated.
Session 2Covenants, Pricing and Origination Practice
- Design loan covenants that require climate-related disclosure or transition milestones from exposed borrowers.
- Adjust pricing or tenor for exposures carrying elevated physical or transition risk identified in the assessment.
- Brief relationship managers and credit committees on how to raise climate risk factors during origination.
- Balance climate risk considerations against other credit factors so no single input dominates the lending decision.
04Reporting and Governance
2 sessions · 8 points
Session 1Climate Stress Testing and Supervisory Reporting
- Prepare a climate stress testing submission that documents scenarios, methodology and portfolio results.
- Reconcile climate risk assessment outputs with financed emissions and broader ESG reporting to avoid inconsistency.
- Present heat map and scenario results to a risk committee in a format that supports a specific decision.
- Respond to common supervisory questions on data quality, scenario choice and model limitations.
Session 2Sustaining Climate Risk Assessment Quality Over Time
- Assign ownership for maintaining the heat map, scenario library and portfolio assessment between review cycles.
- Update sector and geography assumptions as new physical hazard data and transition pathways are published.
- Track how climate risk assessment has changed actual lending decisions over successive review cycles.
- Coordinate climate risk assessment governance with the bank's broader risk appetite and credit policy framework.
What the participant receives
4 course modules
A structured syllabus
8 training sessions
across 5 days
32 detailed points
Applied, detailed content
Accredited attendance certificate
On completing the programme
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