Featured Pathways

More pathways

Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

More pathways

Book a demo

Pricing

Ready to get started?

Plans & Membership

Our Platform

Expert led content

+1,000 expert presented, on-demand video modules

Learning analytics

Keep track of learning progress with our comprehensive data

Interactive learning

Engage with our video hotspots and knowledge check-ins

Testing & certification

Gain CPD / CPE credits and professional certification

Managed learning

Build, scale and manage your organisation’s learning

Integrations

Connect Finance Unlocked to your current platform

Featured Content

More featured content

Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

More featured content

Book a demo

Pricing

Ready to get started?

Featured Pathways

More pathways

Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

More pathways

Book a demo

Pricing

Ready to get started?

Plans & Membership

Our Platform

Expert led content

+1,000 expert presented, on-demand video modules

Learning analytics

Keep track of learning progress with our comprehensive data

Interactive learning

Engage with our video hotspots and knowledge check-ins

Testing & certification

Gain CPD / CPE credits and professional certification

Managed learning

Build, scale and manage your organisation’s learning

Integrations

Connect Finance Unlocked to your current platform

Featured Content

More featured content

Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

More featured content

Book a demo

Pricing

Ready to get started?

Book a demo

Pricing

Ready to get started?

Macro Learnings about Climate-related Credit Losses

Macro Learnings about Climate-related Credit Losses

Tony Hughes

Climate risk modeller

In this video collaboration with MMF and Grant Thornton, risk modeller and data scientist Tony Hughes outlines the impact of climate change on the financial system. More specifically, why climate change has had a limited impact on the financial system so far.

In this video collaboration with MMF and Grant Thornton, risk modeller and data scientist Tony Hughes outlines the impact of climate change on the financial system. More specifically, why climate change has had a limited impact on the financial system so far.

Subscribe to watch

Access this and all of the content on our platform by signing up for a 7-day free trial.

Macro Learnings about Climate-related Credit Losses

9 mins 4 secs

Key learning objectives:

  • Analyse the current and projected impact of climate change on the financial system

  • Explore the macro-level evidence for the impact of climate change on the financial system

Overview:

Despite 50 years or more of global warming, it has been found that climate change has had a limited impact on the financial system. The ECB undertook a climate stress test in parallel to the bank of England's Climate Biennial Exploratory Scenario (CBES) test and they found that corporate probability of default levels would rise by only 7% under a no-action scenario (hothouse world scenario).

Subscribe to watch

Access this and all of the content on our platform by signing up for a 7-day free trial.

Summary

According to Tony Hughes, what risk does climate change pose to bank safety?

The financial system is actually surprisingly robust to climate change, and that will actually give us increased scope to take corrective actions. Despite examples of increased peril from global warming, the evidence that past climate change has impacted the financial system is “underwhelming”. This is supported by evidence from the ECB that is in line with the Climate Biennial Exploratory Scenario (CBES) test based on counterparty probabilities of default (PDs), they found that under a no-action scenario corporate PDs would rise by only 7%.

How does the financial risk from climate change compare to the financial crisis? 

If the calculations on PDs related to climate change are compared against the global financial crisis (GFC) back in the late 2000s, there is a massive difference. During the crisis, PD levels on mortgage portfolios rose by 2000%.  In the GFC there were the types of substantial shocks that were capable of bringing about large-scale or widespread bank defaults, and bank failures, and that's what most people would typically view as financial instability.

What is the macro-level evidence for climate change impacting the financial system? 

Over at least the last 50 years we've seen rising temperature anomalies and falling commercial bank delinquency rates. 

The trending nature of climate is one of the most difficult aspects of this problem to model because there are various other economic variables that have also trended over this period. So we could look at things like interest rates, for instance, have trended lower since the mid-1980s. We could look at something like the male labour force participation rate, which has also been trending lower over this period, and also the population which has aged over this period as well. These are all long-term economic trends, and so what this means is that if we can find trending factors in, for example, credit risk data, then we still face an identification problem in the sense that it will be very difficult for us to convince ourselves that climate is actually driving that trending behaviour, as opposed to one of these other trending factors that are also present in the economy.

To determine whether the climate is actually driving the underlying trending factors we need to look at or try to find natural experiments. But the point here is that it's very difficult to capture the trends and to be able to actually model them and project them into the future.

Subscribe to watch

Access this and all of the content on our platform by signing up for a 7-day free trial.

Tony Hughes

Tony Hughes

Dr Tony Hughes is an expert risk modeller and data scientist at Grant Thornton. Tony has over 20 years of experience in industry and academia. Before he joined Grant Thornton he worked as a senior quantitative modeller at Moody’s Analytics for over two decades. At Moody’s, Tony developed market risk models and structural macroeconomic models for use in simulation and scenario development. Tony’s key focus is in climate modelling and ESG, which Tony described as the “greatest quantitative challenge the industry has faced for many decades”.

There are no available videos from "Tony Hughes"