Make physical climate risk visible across your banking portfolio
UrClimate Next links assets in your credit portfolio to location (latitude–longitude) and NACE information to identify physical climate risk, report exposures across time horizons, and generate disclosure- and audit-ready outputs. Where required, it can also support optional financial impact stress analysis (e.g., via collateral- and credit-risk metrics).
Overview
How physical risk translates into credit risk, collateral value and capital planning.
Use Cases
Portfolio screening, stress testing, ICAAP, risk appetite and pricing examples.
Deliverables
Disclosure-ready tables, maps, dashboards and optional financial impact outputs.
Overview
Report acute and chronic risks for your loan/collateral locations within a single framework.
Key pain points:
- Limited visibility of where exposures sit, what hazards they face, and how this changes over time
- High cost of preparing data/formats for TSRS/IFRS-aligned disclosure and supervisory templates (e.g., EBA)
- Difficulty managing physical risk consistently across time horizons (short/medium/long term)
- Where required, the need to translate risk indicators into optional financial impact stress outputs
What we provide (product + services):
- Risk taxonomy (acute/chronic) and hazard-based exposure identification
- Geographic attribution and concentration (hotspot) analysis
- Sector breakdown (NACE) and time-horizon reporting (short/medium/long term)
- Exportable datasets (Excel/CSV) and an integration-friendly structure for internal systems
Primary hazards (examples):
- Flooding
- Extreme rainfall
- Storm
- Drought
- Extreme heat
- Wildfire
- Sea level rise
Outputs:
- Dashboards
- Tables (Excel/CSV)
- Maps
- API / data services (where needed)
Use Cases
- Portfolio screening: identify high-risk loans/collateral by location
- Geographic concentration: map clustering and hotspots
- NACE-based exposure distribution to support sector-level risk management
- Prepare inputs for stress testing / ICAAP across time-horizon bands
- Generate table packs aligned to disclosure and supervisory reporting needs
Deliverables
- Exposure tables (acute/chronic and hazard-based)
- Geographic distribution and concentration summaries (map + tables)
- NACE breakdown and time-horizon outputs
- Excel/CSV datasets and (where needed) API/data service integration
- Optional: financial impact stress outputs (institution-specific)
How physical climate risk becomes credit risk
In a credit portfolio, physical climate risk reaches the balance sheet through three channels. The first is probability of default (PD): the sensitivity of the borrower’s sector (NACE) to hazards such as flood, drought, extreme heat, wildfire, storm and sea-level rise affects its cash flow and capacity to pay. The second is loss given default (LGD): the location and vulnerability of real-estate collateral set the collateral impairment and thus the share that cannot be recovered in default. The third is the debt service coverage ratio (DSCR): in project finance, revenue and operating-cost sensitivity changes the project’s capacity to service its debt. The output of the three channels flows into expected credit loss (EL = PD × LGD × EAD), IFRS 9 provisions, risk-weighted assets and the internal capital adequacy assessment (ICAAP). The full chain from hazard to financial metric, with definitions, is explained on our physical climate risk and financial impact page.
Portfolio-level measurement starts by matching every asset to a location (latitude and longitude) and a sector code; hazard is projected by year under climate scenarios (middle-of-the-road and high-emission); the sector’s vulnerability and the loan parameters are added; the result is read in currency by loan, sector, province and time horizon (short, medium, long term). Hazards are not treated as independent; compound hazard structures are built into the calculation.
Regulatory framework: BDDK guidance, TSRS 2, EBA Pillar 3
The Turkish banking regulator BDDK’s Guidance on the Management of Climate-Related Financial Risks, dated 13 March 2025, entered into force on 1 July 2025. It asks banks to identify and quantify climate-related financial risks and to include the material ones, including stress tests where appropriate, in their internal capital and liquidity adequacy assessment processes, and to assess physical and transition risks through scenario analysis as drivers of credit, market, liquidity and operational risk. As a rule, banks are within TSRS scope regardless of size; the exceptions and dates are on the timeline page. TSRS 2, Türkiye’s adoption of IFRS S2, requires in paragraphs 15 to 21 the current and anticipated financial effects of climate-related risks to be disclosed with quantitative and qualitative information. The European Banking Authority’s final draft implementing technical standards of 22 June 2026 (EBA/ITS/2026/02) update the ESG risk disclosures under Article 449a of CRR3; application dates depend on adoption by the European Commission. For the dates see the Türkiye climate regulation timeline; for the capital consequences see our article on physical climate risk for banks.
From measurement to reporting: a typical workflow
- Data: asset location, sector code and loan parameters from the credit portfolio; the data stays inside the bank’s network, and air-gapped deployment is supported.
- Hazard mapping: location-based projections for six physical hazards, by scenario and year; acute and chronic risk profile.
- Financial quantification: PD, LGD and DSCR shifts; expected credit loss; collateral value loss; capital impact; audit-trailed drill-down to a single loan.
- Reporting: TSRS 2 climate report sections (Turkish and English), EBA Pillar 3 Template 5 (CSV and Excel), an annex for the BDDK guidance and ICAAP; the computation engine is deterministic, the same input always yields the same output.
This workflow runs on UrClimate Next inside the bank’s own infrastructure. The platform is not a green label or taxonomy-alignment tool; it does not produce GAR/BTAR; its focus is the measurement and financial quantification of physical risk.
Frequently asked questions
Which hazards are covered? Flood, storm and wind, wildfire, drought, extreme heat and sea-level rise, split into acute and chronic, under the SSP2-4.5 and SSP5-8.5 scenarios on an annual 2015-2100 axis.
In what unit is the output? Changes in PD, LGD and expected credit loss in currency at loan and portfolio level, plus prioritization on a 0-100 score and geographic, sectoral and maturity breakdowns.
Can an auditor reproduce the result? Yes. The source, formulation and timestamp behind every number are kept in the audit log; the engine is deterministic.