In 2DegreesInvesting/r2dii.climate.stress.test: Climate Transition Risk Stress Test for Listed Equity, Corporate Bond and Corporate Loan Portfolios

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r2dii.climate.stress.test

The goal of r2dii.climate.stress.test is to provide a tool that can be used to conduct what-if climate stress test analyses for financial institutions, supervisors, regulators and other stakeholders. The tool aims at highlighting potential financial risk in especially climate relevant sectors, split by production ald_business_unit where required. The sectors covered by the 2DII climate stress test and therefore by this package, follow mostly the logic of the Paris Agreement Capital Transition Assessment (PACTA) tool, but can in principle be adapted to other settings. Application of the code requires availability of custom data. For more information about the methodology and inquiries on running a pilot of the stress test in cooperation with 2DII, please contact [e-mail].

Prerequisites

We assume the user has successfully run at least the matching part of PACTA for Banks to produce the relevant project-specific raw input files. For a complete overview of the necessary prerequisites (including technical setup) please see Prerequisites.

Installation

Install the development version of r2dii.climate.stress.test from GitHub with:

# install.packages("devtools")
devtools::install_github("2DegreesInvesting/r2dii.climate.stress.test")

Example

• Use library() to attach the package

library(r2dii.climate.stress.test)

• Run climate stress tests

## run stress testing for assets of type corporate loans using default parameters
run_trisk(
  input_path = "/example_project/project_agnostic_input/",
  output_path = "/example_project/output",
)

## run stress testing (litigation risk) for asset of type corporate loans using various risk_free_rates to analyse sensitivities
run_lrisk(
  input_path = "/example_project/project_agnostic_input/",
  output_path = "/example_project/output",
  risk_free_rate = c(0.01, 0.03)
)

Details

To actually run an analysis...

• the project directories must be set up,
• input data must be prepared and
• the detailed options available for running the functions ought to be understood.

Detailed information for all these steps and on interpreting the outcomes can be found in the articles linked here.

Funding

The development of the stress test methodology and the technical software implementation was funded by the EU - LIFE PACTA 2.0 (LIFE19 GIC/DE/001294). The views expressed are the sole responsibility of the authors and do not necessarily reflect the views of the funders. The funders are not responsible for any use that may be made of the information it contains.

2DegreesInvesting/r2dii.climate.stress.test documentation built on June 6, 2024, 8:23 a.m.