2 - Assessment of climate risks
2.1 - Assessment of the vulnerability of Groupe BPCE’s assets to climate change
For our financing activities, the vulnerability of customers to climate risks is assessed using an analytical approach applied to the borrower’s sector of activity, to the customer itself or to the transaction, as the case may be. Risk management is based on the collection of counterparty- specific data (obtained directly from our customers or from external providers), transaction-specific data (based on the Equator Principles and the Green Weighting Factor rating mechanism) and sector-specific analyses conducted on an ad hoc basis. The purpose of this data collection is to produce summaries of risks by sector of activity, to support credit decisions with non-financial input (ESR Screening) and to monitor portfolio risks (GWF coloring of the Corporate & Investment Banking portfolio).
This same approach is currently being extended to our proprietary investment activities. However, a climate risk analysis has also been applied since 2020 to the Group’s liquidity reserve.
CREDIT PORTFOLIO
Borrowers Climate and environmental data
Transactions Climate and environmental data
Ad hoc sectors Climate analyses
Summary of climate risks by sector of activity
Support for credit decisions
Monitoring of portfolio risks
Climate risk analysis applied to the liquidity reserve
A non-financial analysis of the liquidity reserve has been performed since December 2019. This information enables Groupe BPCE companies to better manage their portfolios and to communicate on their inclusion of ESG criteria. The ISS ESG ratings range from A+ (excellent performance, the two highest rated issuers are A-) to D- (poor performance). Issuer ratings are comparable across all sectors. Based on the SSI ESG ratings, the Climate Risk Unit performs an ESG analysis according to the environmental focus of the company’s portfolio, and identifies the lowest rated issuers. Since April 2021, BPCE’s Financial Management Department has completed the metrics for monitoring the liquidity reserve held in securities with a breakdown of the portfolio in terms of ESG rating (from A to D-) but also in terms of the share of sustainable securities - green, social, sustainable and sustainable-linked securities - managed in Groupe BPCE’s liquidity reserve.
Breakdown of valuations on Groupe BPCE's liquidity reserve
Global portfolio at Dec. 31, 2020 according to the global and environmental ESG ratings provided by ISS ESG
This diagram represents the breakdown of valuations on Groupe BPCE’s liquidity reserve.
Environmental Rating
Excellent & Good: 9.1%
Medium: 88.4%
Poor: 2.5%
Overall GSR Rating
Excellent & Good: 73.2%
Medium: 26.4%
Poor: 0.4%
In order to have a Group vision and to manage the liquidity reserve dynamically, an annual non-financial analysis was extended to include all the Banque Populaire and Caisse d’Epargne networks in the summer of 2021 via a dynamic Power BI tool and updated monthly.