THE GROUPE BPCE CLIMATE REPORT OCTOBER 2021

3 Risk Management

Materiality matrix for Groupe BPCE risks
Risk category Physical risks Transition risks
 
Horizon of the BPCE 2024 strategic plan
Time horizon: long term (> 4 years)		 Horizon of the BPCE 2024 strategic plan Time horizon: long term (> 4 years)
Type of risks Acute Chronic Acute Chronic
Credit and counterparty risk: customer default, collateral impairment Low Medium Medium High
Market and asset valuation risk: changes in the valuation of equities, interest rates, commodities, etc. Low Medium Low Medium
Liquidity risk: risk of short-term liquidity crisis, refinancing risk Low Medium Low Low Medium
Insurance risk Low Medium Low Low Low
Proprietary investment risk Low Medium Low Low
Risk inherent in customer portfolios (insurance and asset management) Low Medium Low Medium
Operational risk Low Medium Low Medium
Reputation risk Low Low Medium High
Strategic risk Low Medium Medium High
Legal, compliance, and regulatory risk Low Low Medium High
MARKET AND ASSET VALUATION RISK
  • Extreme weather events as well as economic changes resulting from transition may trigger abrupt reversals in the financial markets, creating volatility in financial assets (securities, derivatives, funds, etc.), real estate or other vehicles with potential capital losses tending to become stranded assets or causing market players to incur losses.
  • For example, the fact that Groupe BPCE entities specializing in private equity place investments in companies exposed to weather events induces a risk that their portfolio will decline in value.
LIQUIDITY RISK
  • Groupe BPCE invests its liquidity reserve on the markets and consequently pays close attention to the ESG performance of the issuers of the securities it purchases.
  • For example, each Groupe BPCE’s company has the environmental rating of its liquidity reserve. A standard is currently being developed with a view to prohibiting any investment in securities below an environmental rating grade (see section 2.1).
OPERATIONAL RISK
  • Major climate events (disasters, floods, etc.) present a risk of business disruption. Losses affecting the bank’s real assets (real estate, equipment, IT infrastructure, etc.) may generate substantial losses for the Group.
  • To respond to the physical climate risks liable to affect its own activities, Groupe BPCE has set up a business continuity plan that defines the procedures and resources enabling the bank to deal with natural disasters in order to protect employees, assets and key activities and to ensure the continuity of essential services.