Scenario analysis has been widely used by financial institutions to assess the impact of climate-related risks, both physical and transition, on their assets. Based on our knowledge, this approach has not been used so far to evaluate the forward-looking scoring models of small and medium enterprises (SMEs) loan portfolios. To fill this gap, we analyse a comprehensive dataset on 3.9 million loans to SMEs from 2013 to 2022 for three European countries (Belgium, Italy, and Portugal).
To estimate the SME probability of default, we consider a survival approach with macroeconomic variables. We then project the macroeconomic variables under the mitigation scenarios provided by the Network for Greening the Financial System (NGFS) with a time horizon up to 2050. Climate risks increase the projected SME default probabilities in the short term, especially under a delayed transition and a Fragmented World scenario. In the long run, the transition under a Net Zero 2050 scenario brings co-benefits regarding a lower default probability than under a delayed transition scenario or a Fragmented World scenario.
Raffaella Calabrese is Professor of Statistics and Data Science at the University of Edinburgh Business School and Jean Monet fellow at the European University Institute.
She is a leading international expert in credit risk modelling, digital and sustainable finance. She works closely with financial institutions and regulators to propose analytical solutions to better measure financial risks. Her research expertise includes Climate Stress Testing, the use of AI for Credit risk Modelling and access to finance for small businesses.
She has conducted research, policy and consultancy work for a number of organisations, including the European Commission, The European Banking Authority, the Bank of England, Experian, Equifax, SAS, Nationwide and several Fintech companies. She attracted more than £7M research funding for projects in collaboration with the financial sector.
The seminar will be held in English.
Major information: Andi Duqi (andi.duqi@unibo.it).