Finastra, a global provider of financial software applications and marketplaces, and Green RWA, a pioneering association in climate transition, announced the launch of the Climate-Extended Risk Model (CERM) Sandbox.
The new platform reportedly “offers an interactive and immersive experience for banks to understand and manage climate risks in a simple and accessible manner.”
The CERM lies “at the core of the Sandbox, designed to enhance financial resilience in the face of climate change.”
The climate risk management framework “comprises two main components: physical and transition risks.” By integrating this into the existing capital framework, the solution extends the current credit risk model “used by banks, providing a comprehensive approach for identifying long-term, global, and evolving climate risks and enabling more accurate calculations of potential losses.”
Olivier Vinciguerra, Chair of Green RWA, said:
“By launching the CERM Sandbox, we aim to provide the finance industry with a comprehensive approach to understanding and managing climate-related financial risks at the highest level. This is a huge achievement, in line with Green RWA’s goal to support energy transition financing, and I want to thank Finastra for its support on that journey.”
Chirine BenZaied-Bourgerie, Head of Innovation at Finastra, said:
“Including environmental, social and governance (ESG) factors within risk assessments has become a board-level discussion for banks. Partnering with Green RWA is one of Finastra’s contributions towards providing the industry with tools for better climate risk management. Finastra is open by default, and we believe that open culture and technology are key for innovation and collaboration. By bringing the Sandbox to the community, we are helping the global banking industry effectively manage the impact of climate risks in their lending portfolios.”
The CERM Sandbox is “accessible to all interested users, including financial institutions, policymakers, and the general public.”
As noted in the update, Green RWA (Risk-Weighted Assets) is “a non-profit association that firmly believes the climate transition requires the collaboration of the entire financial community.”
Green RWA is “committed to working with financial institutions to optimize their capital budget related to climate risks.”
Green RWA has “a global reach and has members across 4 continents, reflecting the need for international and coordinated action in the fight against climate change.”