OakNorth Credit Intelligence (ONci), the go-to SaaS partner for commercial banks to lend smarter, faster, and more, today announces a major product enhancement of the ON Climate application that allows users to analyze transition risk and impact for each year up until 2050.
The ON Climate application is part of ONci’s broader ON Credit Intelligence Suite which provides banks with a granular, bottom-up, forward-looking view of their commercial loan portfolio. The software enables banks to incorporate scenario analysis, including climate scenarios into their monitoring and annual review process, meaning they can create a dynamic credit culture while reducing the cost of managing commercial portfolios, all while holding firm to credit standards.
Transition risks can arise from the process of adjustment towards a low-carbon economy, with a range of factors influencing this adjustment. These include climate-related developments in policy and regulation, the emergence of disruptive technology or business models, shifting sentiment and societal preferences, or evolving evidence, frameworks, and legal interpretations. The latest ON Climate product release from ONci will allow customers to analyze these transition risks and impacts for each year up until 2050, in accordance with the time horizons analysis suggested by the US Federal Reserve in their pilot climate scenario analysis.
The new update, which is a market first, will also enable commercial lenders to:
• Align transition risk scores with loan tenures to understand climate impact at loan expiration dates for potential refinancing conversations;
• Report financed emissions trajectory on an annual basis to stakeholders;
• Create emission abatement curves on an annual basis for TCFD reporting;
• Understand and extract transition risk-adjusted impacted financials at annual time horizons for credit risk analysis.
Yugal Yadav, Senior Director of Product, Climate Change Credit Risk and Opportunities at ONci, commented: “Businesses of all sizes across the globe are facing an increasing level of climate-related risks from a growing number of extreme weather events, including floods, forest fires, and cyclones.
These climate-related financial risks, including both physical and transition dangers, have the potential to dramatically impact a bank’s loan book and overall performance, while also affecting several key sectors of the economy. With our latest product release, banks will be able to mitigate, manage and track climate risks from this year up to 2050, while also quickly identifying sectors and borrowers that have the greatest climate risk and create effective transition strategies - helping borrowers confidently navigate the unique climate transition situations within their industry.”