2.2 - Measuring the impact of climate risks on Groupe BPCE assets
In 2020, Groupe BPCE volunteered to take part in an initial climate risk assessment exercise led by the European Banking Authority (EBA).
The aim of the analysis was to better understand the vulnerabilities of banking institutions to climate risks by providing, among other things, an initial estimate of the amount of green financing by European banks as defined in the European taxonomy.
The EBA also sought to map the exposures of banking institutions to climate risks and to provide an overview of the efforts made by banks so far to appraise these risks. At the European level, the results highlighted the need to pursue the drive to achieve a significant and smooth transition to a low-carbon economy. Groupe BPCE is therefore continuing its in-house work on climate and environmental risk analysis, notably efforts related to the integration of the European taxonomy into internal classifications.
Groupe BPCE also contributed to the pilot exercise launched by the French Prudential Supervisory Authority (ACPR, Autorité de Contrôle Prudentiel et de Résolution) in 2021 aimed at estimating physical and transition risks based on three scenarios: a benchmark scenario under which an orderly transition would allow the Paris Agreement objectives to be met, a scenario with an accelerated transition, and another with a delayed transition.
Towards a common European language
Groupe BPCE is making preparations for the use of the future European Taxonomy and carried out the necessary work to make it an integral part of its assessment procedures in 2020. Reference to the criteria of this taxonomy is included in the sectoral policies for granting loans, and these criteria are used as a basis for reflection in strategic work for integration into information systems and customer monitoring processes. BPCE and Natixis have been involved on a voluntary basis in the work carried out by UNEP FI and the European Banking Federation (EBF) since the summer of 2020 on the method for applying the European Taxonomy to banking assets. Several counterparties from different business sectors have consequently been analyzed according to the principles of the EU Taxonomy (recommendations of the Technical Expert Group).
This graph shows the transition risks and physical risks taking into account the net emissions and time horizon between 2020 and 2050.
Benchmark scenario: Orderly transition, objectives achieved
Alternative No.1: Delayed and disjointed transition, objectives not achieved
Alternative No.2: Accelerated transition, objectives achieved
TRANSITION RISKS
It emerges from this study that Groupe BPCE’s corporate finance portfolio shows little sensitivity over time to the sectors identified as ‘sensitive’ and ‘of interest’ in terms of climate risks.
PHYSICAL RISKS
In this exercise, we measured the sensitivity of the housing loan portfolio to physical climate risks and part of the corporate portfolio to the Basel parameters PD (probability of default) and LGD (loss given default) by 2050. The results show that the sensitivity of the housing loan portfolio is lower (PD increase of less than 10%) than that of the corporate portfolio (PD increase of 20%).
This ACPR-run exercise made it possible to carry out the first stress tests on climate risks using specific metrics and time periods that differ considerably from other banking stress tests. The results of this exercise show, in particular:
- The possibility of improving knowledge of banking customers thanks to this analysis process,
- The need for a realistic common methodology shared by European banks, The currently limited availability of the information required to bring these analyses to a successful conclusion.