Module 3
Climate Risk in Lending :
Climate Risk in Lending :
From Heat Maps to Portfolio Action
Green Swans & Grey Zones: Climate Risk for the Practitioner
4 Sessions · 6 Hours · One Intensive Day · Face the reality.
SESSION - I
90 MIN
Climate Risk Basics for Lenders
Physical Risk. Transition Risk. Credit Risk — Not Just ESG Reporting.
- What physical risk means for an NBFC borrower — floods, heat stress, water scarcity.
- Transition risk: policy shifts, carbon pricing, stranded assets.
- Why climate risk is credit risk — default probability, collateral erosion, repayment capacity.
- NBFC lens: how climate events affect microfinance, MSME, and housing borrowers.
- RBI’s evolving climate risk framework and disclosure expectations.
SESSION - II
90 MIN
Sector Heat Maps and Portfolio Vulnerability
Geography. Borrower Type. Sector Exposure — Read the Heat Map.
- Build and interpret sector-level climate vulnerability heat maps.
- Geography-based risk layering: coastal, flood plains, drought zones, urban heat islands.
- Borrower-type vulnerability: agri-linked, informal MSME, low-income housing.
- NBFC portfolio mapping: identifying high-exposure pockets.
- Using NGFS and RBI sector classifications for portfolio segmentation.
- Practical heat-map exercise: scoring your own book.
SESSION - III
90 MIN
Climate Risk in Credit Appraisal
Underwriting, Covenants, Collateral, and Early Warning Signals
- How climate exposure changes underwriting assumptions for NBFC portfolios.
- Covenant design for climate-sensitive sectors (agri, housing, MSME).
- Collateral comfort re-assessment in flood-prone or drought-affected geographies.
- Repayment capacity stress from climate-driven income disruption.
- Early warning signals: weather events, crop failures, migration patterns.
- Integrating climate flags into existing EWS frameworks.
SESSION - IV
90 MIN
Climate Risk, Stress Testing, and Action Plans
Scenario Analysis. Portfolio Stress Tests. Lending Action.
- Scenario analysis basics: orderly transition, disorderly transition, hot house world.
- Running a portfolio stress test for climate concentration risk.
- Setting concentration limits by geography, sector, and climate-risk band.
- Converting climate findings into lending policy action — what to tighten, what to monitor.
- Building a climate risk action plan for an NBFC credit committee.
- Regulatory readiness: RBI FY2027/28 mandatory climate disclosure preparation.
Target Group
Business/ investment teams, credit and risk officers, ESG/sustainability leads, branch heads, and mid-level leadership — anyone assessing physical and transition risk in the investment book or building climate-aligned products. Especially relevant for teams managing geographically dispersed, climate-exposed portfolios.
Organisation-Level Benefits
- Map climate-exposed pockets across the NBFC portfolio using geography, borrower-type, and sector heat maps.
- Build credit appraisals that factor physical and transition risk into underwriting, covenants, and collateral comfort.
- Upgrade early warning systems with climate flags such as weather shocks, crop failures, and migration patterns.
- Stress-test portfolio resilience across orderly, disorderly, and hot-house-world climate scenarios.
- Set concentration limits and lending triggers by geography, sector, and climate-risk band.
"Climate risk doesn't respect the boundaries we've drawn around financial sectors — it's not cyclical, it's directional and accelerating."
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