Environmental Risk Assessment – and Climate exposure of the business borrowers of the Bank
In 2011, Piraeus Bank developed specialized tools to evaluate environmental risk. Environmental risks are the potential negative consequences to a business that result from its impacts (or perceived impacts) on the natural environment (i.e. air, water, soil). For the most part, environmental risk is assessed by environmental indices (eg. Kilos of greenhouse gases or kilos of liquid waste) as well as by financial indices, especially concerning physical or regulatory risk arising from climate change. Indeed, in climate change risk, there are financial indices, which estimate possible solutions and reduction practices.
In the framework of the EU co-funded climabiz project, the Climate Risk Management Model, an IT application that assesses the risk deriving from climate change at sector, sub-sector and business level, was developed. This application calculates in financial terms climate risk (physical and regulatory) for businesses active in the fields of manufacturing, farming, shipping, energy production and services (hotels, offices, hospitals). The Climate Risk Management Model can analyze 173 subsectors (at a 4digit nace code level) and 324 typical units. In addition, the application has the ability to calculate the implementation costs and benefits of the practices that a company can apply in order to reduce its climate risk. Moreover, total calculation of environmental footprint at business, branch and sub-branch level is also possible. In particular, further to greenhouse gases, other air pollutants as well as liquid waste can be calculated. Finally, with the Climate Risk Management Model, Piraeus Bank estimates the climate exposure of the businesses of the Bank’s loan portfolio, based on the sector of the borrower’s economic activity.
The climate exposure of the Bank’s portfolio financed businesses is assessed on a yearly basis:
Climate exposure for a specific sample of businesses was assessed in 2017, regarding the average unit market price of greenhouse gas emission allowances, based on a price equal to €7/t CO2eq.
Climate exposure of businesses amounts to €541,5 mil, i.e. 1.3% of their total annual turnover.