ESG Governance and Climate Risk Stress Testing
Leading Qatari bank
The bank needed its ESG governance assessed against QCB principles, climate stress testing run across its portfolio, and the results translated into the credit and liquidity metrics it already uses.
Scope of work
Governance gap assessment of board and committee charters against QCB principles and global ESG benchmarks, with ESG responsibilities defined through a RACI matrix spanning the board, its committees, senior management and the risk and compliance functions, and tailored director training delivered on ESG oversight, strategy and disclosure.
NGFS scenarios applied across three policy pathways:
- Current policies, at plus three degrees
- Delayed transition, at plus two degrees
- Net zero 2050, at plus one and a half degrees
Top-down and bottom-up modelling run in parallel: sector-level market shock modelling on portfolio valuations, and issuer-specific carbon cost analysis linking emissions to EBITDA and asset value impact.
Credit integration, translating stress outputs into probability of default and loss given default and feeding them into the bank's internal rating model, so climate impact arrives in the metrics the credit function already works with.
Liquidity analysis identifying ESG-driven strain channels and the response to them:
- Reputational shocks and regulatory cost shocks
- Climate-driven disruption and transition-driven funding constraints
- A narrative impact report produced, with enhancements proposed to the liquidity framework
Outcome and value
- ESG accountability assigned to named functions from board level down.
- Climate impact quantified at issuer and portfolio level under three policy pathways.
- Climate risk integrated into the internal rating model rather than reported alongside it.
- Liquidity framework enhancements identified against ESG-driven strain.