Climate Risk with Particular Emphasis on the Relationship with Credit-Risk Assessment: What We Learn from Poland

This research seeks to identify non-financial enterprises exposed to the climate risk relating to transition risks and at the same time use of bank loans, as well as to conduct stress tests to take account of the financial risk related to climate change. The workflow through which to determine the a...

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Main Author: Natalia Nehrebecka
Format: Article
Language:English
Published: MDPI AG 2021-12-01
Series:Energies
Subjects:
Online Access:https://www.mdpi.com/1996-1073/14/23/8070
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author Natalia Nehrebecka
author_facet Natalia Nehrebecka
author_sort Natalia Nehrebecka
collection DOAJ
description This research seeks to identify non-financial enterprises exposed to the climate risk relating to transition risks and at the same time use of bank loans, as well as to conduct stress tests to take account of the financial risk related to climate change. The workflow through which to determine the ability of the banking sector to assess the potential impact of climate risk entails parts based around economic sector and company level. The procedure based on the sectoral level identifies vulnerable economic sectors (in the Sectoral Module), while the procedure based on company level (the Company Module) refers to scenarios presented in stress tests to estimate the probability of default under stressful conditions related to the introduction of a direct carbon tax. The introduction of the average direct carbon tax (EUR 75/tCO<sub>2</sub>) in fact results in increased expenditure and reduced sales revenues among enterprises from sectors with a high CO<sub>2</sub> impact, with the result being a decrease in the profitability of enterprises, along with a simultaneously higher level of debt; an increase in the probability of default (<i>PD</i>) from 3.6%, at the end of 2020 in the baseline macroeconomic scenario, to between 6.31% and 10.12%; and increased commercial bank capital requirements. Financial institutions should thus use <i>PD</i> under stressful conditions relating to climate risk as suggestions to downgrade under the expert module.
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spelling doaj.art-53f8db9346af45a8ad77f511d7dada962023-11-23T02:22:12ZengMDPI AGEnergies1996-10732021-12-011423807010.3390/en14238070Climate Risk with Particular Emphasis on the Relationship with Credit-Risk Assessment: What We Learn from PolandNatalia Nehrebecka0Faculty of Economic Sciences, Warsaw University, Długa 44/50, 00-241 Warsaw, PolandThis research seeks to identify non-financial enterprises exposed to the climate risk relating to transition risks and at the same time use of bank loans, as well as to conduct stress tests to take account of the financial risk related to climate change. The workflow through which to determine the ability of the banking sector to assess the potential impact of climate risk entails parts based around economic sector and company level. The procedure based on the sectoral level identifies vulnerable economic sectors (in the Sectoral Module), while the procedure based on company level (the Company Module) refers to scenarios presented in stress tests to estimate the probability of default under stressful conditions related to the introduction of a direct carbon tax. The introduction of the average direct carbon tax (EUR 75/tCO<sub>2</sub>) in fact results in increased expenditure and reduced sales revenues among enterprises from sectors with a high CO<sub>2</sub> impact, with the result being a decrease in the profitability of enterprises, along with a simultaneously higher level of debt; an increase in the probability of default (<i>PD</i>) from 3.6%, at the end of 2020 in the baseline macroeconomic scenario, to between 6.31% and 10.12%; and increased commercial bank capital requirements. Financial institutions should thus use <i>PD</i> under stressful conditions relating to climate risk as suggestions to downgrade under the expert module.https://www.mdpi.com/1996-1073/14/23/8070climate changescenario analysiscredit-risk assessmentfinancial stability
spellingShingle Natalia Nehrebecka
Climate Risk with Particular Emphasis on the Relationship with Credit-Risk Assessment: What We Learn from Poland
Energies
climate change
scenario analysis
credit-risk assessment
financial stability
title Climate Risk with Particular Emphasis on the Relationship with Credit-Risk Assessment: What We Learn from Poland
title_full Climate Risk with Particular Emphasis on the Relationship with Credit-Risk Assessment: What We Learn from Poland
title_fullStr Climate Risk with Particular Emphasis on the Relationship with Credit-Risk Assessment: What We Learn from Poland
title_full_unstemmed Climate Risk with Particular Emphasis on the Relationship with Credit-Risk Assessment: What We Learn from Poland
title_short Climate Risk with Particular Emphasis on the Relationship with Credit-Risk Assessment: What We Learn from Poland
title_sort climate risk with particular emphasis on the relationship with credit risk assessment what we learn from poland
topic climate change
scenario analysis
credit-risk assessment
financial stability
url https://www.mdpi.com/1996-1073/14/23/8070
work_keys_str_mv AT natalianehrebecka climateriskwithparticularemphasisontherelationshipwithcreditriskassessmentwhatwelearnfrompoland