Development finance actors have recently recognized the need to mainstream climate change in the financial assessment of their projects portfolios, However, development finance institutions do not yet dispose of in-house, tailored metrics to main-stream climate risk assessment across all the phases of their projects evaluation. This gap represents a barrier for delivering on their mandate and to scale up private investments into climate-aligned sectors.
In order to fill in this gap, by building on Battiston et al. (2017), we develop the first climate stress-test methodology targeted to development finance institutions, and we apply it to the energy portfolio loans of two major Chinese policy banks, i.e. China Development Bank (CDB) and Export-Import Bank of China (CEXIM). See more details in Monasterolo ea. 2018 (forthcoming on Journal of China and the World Economy).
With the climate stress-test, we can evaluate today the expected value of a loan exposed to a climate policy and a balance sheet shock. The following interactive dashboards allow to explore the overseas investments of Chinese Development Finance Institutions.
Sectors of portfolio by Region and by projects
– The first chart below shows the geographical mapping of Chinese policy banks’ oversea investment in each energy sector. Fossil fule (oil, coal and gas) and hydro power are the main energy sector in the overall portfolio. Reforming economy (primarily Russia), Latin America (primarily Brazil) and India+ (primarily Pakistan) are the top recipient regions.
The second chart below gives a vivid illustration of the individual projects in each energy sector. The longer the color bar is, the bigger the size of the project. More information as the location and brief project description can be viewed as one move onto the color bars.
Shocks by Sector and Region
The first chart below shows the shocks in thousand USD unit of each region under all energy sectors. Left bars means it would be negative shocks to the region, ie. losses on overall loan values in a certain energy sector. Right bars means such regions will obtain positive changes in their overall loan value in that energy sector. Filters on the right side of the figure provides the opportunity to choose which climate scenario and economic model to project the potential losses and gains.
The second chart below shows more detailed information of the shocks, as on project level. One can observe the source of shocks in each sector as from which exact project. Due to the number of projects (199 in total), there are many small shocks that composed this color span on the most left and most right side of the bars. Filters on the right side of the figure provides the opportunity to choose which climate scenario and economic model to project the potential losses and gains.
The SIMPOL Project is currently funded by the H2020 European grant DOLFINS (no. 640772) in the Global Systems Science area of the Future Emerging Technologies program.