The National Bank of Georgia (NBG), in cooperation with German Sparkassenstiftung for International Cooperation (DSIK), has prepared a report on Climate-related Risk Radar for Georgian Economic Sectors and its possible application for the Financial Sector. The report develops a climate risk scorecard for Georgian economic sectors and assesses the financial sector’s exposure to the identified risky sectors.
The Risk Radar is a scoring methodology that chooses the top-down approach and uses available data to assess the potential climate risk of a sector. By using the top-down approach, the data availability problem at the loan level that exist in the context of ESG and climate risk assessment is efficiently solved. The risk radar covers both acute and chronic physical climate risks as well as transition risks. Other ESG risks are only considered from a more high-level perspective.
This scoring systematic of the risk radar has been applied for all main sectors in Georgia classified according to the NACE sector codes. This assessment has been conducted in a two-step process with an initial desk research followed by a discussion - and review workshop with local experts. After the sectors that are most affected by either physical climate risks or transition climate risks, or both are identified, commercial banks’ exposures to these high-risk sectors are assessed using a heat map.
The description of the methodology, detailed results and possible application are presented in the report that is available on on the NBG webpage. The report was also presented to the Sustainable Finance Working Group members alongside with other interested parties.
