Large US Bank Meets Strategic Climate and Investment Goals via Broad Single Provider Solution

Natural disasters are becoming more frequent, resulting in more significant catastrophes. The ongoing effects mean banks in the U.S. have no choice but to pay closer attention to climate issues. From debt and equity capital markets to physical losses from default and the entire risk spectrum, a comprehensive sustainability framework is increasingly critical.

Pain Points

Conversations with this large commercial bank began within their Capital Markets and Wealth Management teams around sustainability-related issuances and investments. In particular, their Risk Management team wanted to look at the impact of different scenarios for transition pathways and risks on the bank’s corporate clients involved in high carbon-emitting sectors to understand how this would affect the creditworthiness of obligors. This team also needed transparency into the model output, as well as documentation to back our proposed approach. However, as additional groups from the bank were brought into the conversation, it became clear they would benefit from incorporating a broad sustainability framework together versus a piecemeal approach. A multi-vendor approach could have solved their needs, but they would then face the challenge of integrating different data sources, products, and solutions.

In particular, the bank was suffering from three central problems:

1. Unreliable Data: public reporting of granular emissions data to adhere to disclosure recommendations
2. Inaccurate Credit Decisions: unable to correctly calculate transition-adjusted credit risk
3. Shareholder Trust: ensuring that ESG performance data is published to meet shareholder scrutiny
   
   

The Solution

The client issued an RFP to review its ESG-related data and research and to address the bank's strategic climate and investment goals. We authored a deep-dive proposal supported by numerous demos, product and subject matter expert sessions, and other proofs-of-concept. S&P Global Market Intelligence was able to present a solution that solved many of the customers’ challenges, with key differentiators including:

• Breadth: One-stop-shop for ESG scores, environmental & climate data, and climate credit analytics
• Depth: Hundreds of data points on thousands of public and private companies and sovereign debt issuers
• Integration: 200+ complementary datasets across S&P Global Market Intelligence and other divisions
• Technology: State-of-the-art data feed and workflow solutions, including Xpressfeed™, Snowflake and the S&P Capital IQ Pro platform
• Reputation: Unparalleled reputation of S&P Global and ESG specialist teams within our Sustainable1 organization
  
  

We provided the bank's teams with a sound bottoms-up methodology to evaluate transition paths to net zero under different climate scenarios, an automated approach to produce portfolio-wide results, the ability to capture industry-specific variables, and access to extensive and reliable financial and environmental data required for the analysis.

From a transparency perspective, the financial institution can now realize variables used in the models under Network for Greening the Financial System, European Central Bank, and Global Carbon Tax scenarios with the ability to override variables with internally developed scenarios. They also receive a full output of financial statements to understand changes in client profitability and cash flow while modeling the output of credit scores and probability of default with insight into variables driving firm risk.

Product Mix

With an expansive suite of products and datasets, the client now has a single data provider for its ESG-related solutions – the client recognized the financial benefit and economies of scale by investing in higher-quality data on a single platform. Additionally, they can use the same solution for internal analytics, corporate reporting, and regulatory compliance. Their client-facing use case includes derived portfolio-level client reporting and de minimis advisory.

	Dataset	Coverage	Content	Datafeed / Platform
	S&P Global ESG Scores	11,300+ companies	One total ESG score, three-dimension scores (E+S+G), and an average of 23 criteria-level scores.	Xpressfeed or Snowflake CIQ Pro
	Trucost Environmental Trucost	16,800+ public companies 2.5M+ private companies 158 GICS sub-industries	Environmental metrics (carbon, water, waste, pollution, and natural resources) and priced externalities.	Xpressfeed or Snowflake CIQ Pro
	Sector revenue data	15,000+ public companies	Revenue data ($, %) based on a 464-sector typology	Xpressfeed or Snowflake CIQ Pro
	Fossil fuels & energy data	~1,200 public companies	Fossil fuel reserves and CAPEX, power generation per technology, and embedded carbon.	Xpressfeed or Snowflake CIQ Pro
	Trucost Sector Average Emission Factors	158 GICS sub-industries	Sector average carbon intensity factors for GICS sub-industries covering Scopes 1,2, and 3, derived from our Environmental data and activity weights.	SFTP or EDX
	Trucost Paris Alignment	18,000+ public companies	Alignment with the Paris Agreement using the SDA-GEVA approach recommended by SBTi.	Xpressfeed or Snowflake CIQ Pro
	Trucost Carbon Earnings at Risk	15,000+ public companies	TCFD transition risk / value-at-risk indicators derived from region- and sector-specific revenue exposure to carbon pricing under three scenarios (low, medium, high).	Xpressfeed or Snowflake CIQ Pro
	Trucost Physical Risk	870,000+ asset locations linked to 20,000+ companies	Physical risk scores for 7 hazards (heatwaves, coldwaves, drought, wildfire, hurricanes, riverine flooding, sea-level rise) and three IPCC scenarios.	Xpressfeed or Snowflake CIQ Pro
	Climanomics™ Real Assets Platform	240+ asset types	Financial impact metrics including Modeled Average Annual loss related to climate physical risk of real assets for 7 hazards and 4 RCP scenarios.	Climanomics™ Platform
	Climate Credit Analytics	5x sector models and 1x generic sector covering 1.6M+ companies	Model focused on climate stress testing, scenario analysis, and impacts on credit risk in compliance with regulatory and voluntary disclosure requirements.	API Excel Plugin
	Sovereign ESG data	211 countries	ESG metrics at the country level including 3x composite E, S, and G pillar scores, 12x composite theme scores, and 44x detailed indicator scores.	- Sovereign Platform
	Business Entity Cross Reference Services	28,000,000+ companies	Cross-reference capabilities for millions of public and private entities using standardized and proprietary identifiers.	Snowflake Xpressfeed
	Global Instrument Cross Reference Service	65,000,000+ instruments	A deep database of global security identifiers cross-referencing over 65 million instruments for reliable linking capabilities.	Snowflake Xpressfeed

Key Benefits

Financed emissions are a proportional measure of the emissions funded by a financial firm’s investments in another firm, based on a formula that includes financial exposure (loan data), greenhouse gas emissions, and the financials. With S&P Global Market Intelligence solutions, the bank's users can cross-reference greenhouse gas (GHG) emissions and financial data on the same platform, saving time and money.

We provided all the necessary data through channels they already used, Snowflake and Xpressfeed™, in addition to availability via our flagship workflow platform, Capital IQ Pro.

The commercial bank was able to:

• Establish a Corporate Strategy: Quantify financed emissions and set targets in alignment with the Partnership for Carbon Accounting Financials (PCAF); Conduct climate stress-testing and scenario analysis to figure out impacts on credit risk in compliance with regulatory and voluntary disclosure requirements.
• Implementation to Achieve Targets: Empower front-line teams with the data and insight to help their clients achieve net-zero targets.
• Quantify Risk: These areas include transition risk, physical risk, and credit risk.
• Establish the Financial Impact of Physical Risk: The average annual loss related to climate physical risk of tangible assets.
• Measure the environmental exposure of investments in the portfolios.
  
  

Click here to explore some of the datasets and solutions used in this case study.