Banks Tackle Drought-Related Loan Default with New Risk Model

Recent droughts show that extreme weather events linked to climate change are no longer a future economic threat but a present danger. India’s current severe dry spell will likely cost the country about $100 billion, according to the Associated Chambers of Commerce and Industry of India. A Brazilian drought that scorched São Paulo between 2014 and early this year may have shaved 2 percentage points off the capital region’s gross domestic product for the six months ended March 2015, economists estimate.

The economic effects ofclimate change越来越真实且可测量，但这并不意味着它们测量得很好。关于干旱和其他人的不确定性weather patternscould wreak havoc on various regions of the world poses a growing problem for the banks that lend to businesses in those places. Seeking answers, several major banks have joined forces to help build a better tool for modeling drought-related default risk.

“此时，没有很多公司正在考虑环境风险作为投资组合信用风险的主要驾驶员，”风险管理解决方案（RMS）高级经理Diminic Smith表示，这是一个基于加利福尼亚州纽瓦克的灾难性建模公司。

A 2013 report from HSBC Global Research concluded that although company leaders and financial analysts often fail to account for how the management of natural resources could affect business operations, that will soon have to change. “Natural capital factors are becoming a bigger driver of overall economic productivity,” the authors wrote. “Ultimately, this will impact the potential return profile of assets.” When it comes to natural capital, HSBC’s climate analysis revealed that the most urgent need is to incorporate water and碳风险management into macroeconomic thinking, the report added.

A new public-private partnership aims to help fill that void. In May the Natural Capital Declaration (NCD), a joint financial sector initiative by theUnited Nations Environment Programme, the German government’s Emerging Markets Dialogue on Green Finance and theGlobal Canopy Programme，牛津，U.K.的智库专门致力于保存热带森林，宣布正在开发一个工具，即银行可以在其贷款组合中使用，以量化特定地区和行业的赔率因极端干旱而违约。

The project also involves nine banks from five countries, including Mexico’s Grupo Financiero Banorte, Itaú Unibanco of Brazil, New York–based Citigroup, Industrial and Commercial Bank of China and Switzerland’s UBS.

在银行做出很多业务的城市中，干燥的天气可能会确切陡峭的价格。The Lloyd’s City Risk Index, which is based on research by the Centre for Risk Studies at the University of Cambridge’s Judge Business School and measures the potential economic fallout from various man-made and natural risks facing urban centers, estimates that drought could cost the world’s 301 leading cities a total of more than $89 billion between 2015 and 2025.

“随着数据分析的进展，特别是在保险建模领域，该项目正试图建立在其他部门的知识并将其带入银行业，”洛杉矶·瓦斯特（牛津）的NCD负责人表示。“它还试图在环境知识和金融部门之间交叉授粉，因为这些信息可能有点凶悍，并以一种从金融机构的角度来看有意义的方式，从自然科学的角度来看。”

The new tool differs from existing forecasting models, designed by climatologists to predict the likelihood of intensifying droughts over the next several decades. The NCD initiative will set its sights on the immediate future — 2017 through 2022 — and model the extent to which the extreme drought already evident in places likeAustralia,Brazil,Indiaand the western U.S. could affect businesses across sectors and regions if it spreads elsewhere. Eventually, banks will be able to enter details about their lending portfolios and, based on borrowers’ locations, receive information about where default risks could lurk.

The NCD risk model will also report on the macroeconomic effects of extreme drought, focusing on four countries to start: Brazil, China, Mexico and the U.S. The participating banks will test the first version this summer, with fine-tuning by RMS to follow. For various drought scenarios, the tool will gauge the impact on inflation, employment and commodity prices — all metrics that have a significant effect on any financial institution.

苏黎世苏联的环境和社会风险的丽莎·阿里·阿尼斯（UBS）负责指出，由于她的银行监督内部压力测试，以评估向低碳经济的过渡如何影响其资产负债表，她在测试中发现了薄弱的斑点。“我们专注于干旱风险，因为预计数据有可用的数据，并且可以与财务风险分析相关联，”Arni表示NCD协作。

RMS的史密斯希望最暴露于干旱风险的公司也可以受益于他建设的模型。“我们觉得奖励借款人在其有效利用水方面采取的一些可缓解步骤并捕捉到贷款过程中的一些影响，”他说。“