UK pensions advisory firm Isio is to use Moody’s Analytics climate risk modelling to assess the financial impact from climate risk exposures, across both physical and transitional risks.
The Pension Schemes Act 2021 from the UK Government requires large UK pension plans to begin reporting in line with Task Force on Climate-related Financial Disclosures (TCFD) recommendations. This includes reporting on the impact of different temperature scenarios and levels of greenhouse gas emissions on a portfolio. Pension plans, as well as insurers, can use the Moody’s Analytics solutions to perform asset and liability projections through climate-aligned scenarios.
“Understanding and managing climate risk is increasingly important for our clients,” says Pat Race, Partner at Isio. “We work with organisations to develop and implement bespoke environmental, social and governance (ESG) policies; as part of this we consider a broad range of ESG risks and assessing climate risk forms an integral part of our ESG approach. Moody’s Analytics has a strong track record in scenario modelling and their solutions and expertise will allow us to provide our clients with more valuable advice around managing their climate risk exposures.”
The climate risk modelling is underpinned by climate-aligned scenarios, which leverage the award-winning Moody’s Analytics scenario generation software and translate climate pathways into expanded financial risk variables to help assess climate-related risks and anticipate the future impact of climate change on asset and liability projections. The climate pathways can be specific to the Network for Greening the Financial System criteria, Moody’s Analytics’ economic climate assumptions, or the client’s own input.
“The Pension Schemes Act 2021 has crystalised the need for large pension plans to report on the ESG risks they are managing, particularly around climate. Our expertise in scenario analysis and climate science is perfectly positioned to help with this,” says Simon Robinson, Director at Moody’s Analytics. “We’re pleased to add Isio to the growing number of firms using our climate-aligned scenarios to model and assess the financial impact from climate risk.”
