Ortec Finance has won Insurance Asset Risk's Climate Risk Solution award for its climate scenarios – the first top-down model, it says - constructed in partnership with Cambridge Econometrics.
These help institutions quantify their portfolio's exposure to "systemic climate-related financial risks and opportunities", according to Ortec Finance.
It says the scenarios - underpinned by the annually-updated E3ME econometric model of Cambridge Econometrics and Ortec Finance's own stochastic financial model, OFS - offer "full climate risk coverage, explicitly modelling extreme and long-term physical, transition, and market risks".
Clients can customise Ortec's climate scenarios by variables such as carbon price and technology adoption, if they wish.
The analytical products, already taken up by insurers, "capture the networked effects of climate change, interconnections, and feedback loops", not just proxying all transition risk by the carbon price.
Thus, the scenarios "can tie together how the global economy will be impacted by climate change from a top-down perspective that other models understate by explicitly modelling over 20 distinct climate policies", Ortec Finance says.
The offering has over 580 sector/region combinations, and separately models "chronic physical and acute extreme weather risks", with the ability to "disentangle the contribution of transition, chronic physical, and acute physical risks from one another".
In the 2024 scenarios, Ortec added effects of recently-announced/implemented policies; the possible impact of tipping points in its 'high warming' scenario; added a 'delayed net-zero' scenario reaching just under two degrees warming; added new technologies such as hydrogen technologies, land-use change such as forestry and "other negative emissions technologies" to transition risk modelling; added sensitivity analyses, particularly linked to physical risks; and a 'climate scenario explorer' with qualitative narratives.
One global insurer enlisted Ortec Finance to provide "robust climate scenarios" for its Solvency II ORSA reports, other regulatory reporting and for inclusion in TCFD-aligned disclosures of their annual report.
