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

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This vignette describes in detail how an analysis can be configured further by providing more custom data. The configurations are not required but, in case additional information is available, may help you improve the accuracy of your results.

Assumptions

In order to keep this vignette concise, we assume the following has been set up:

1. R and RStudio are installed.
2. All required R packages are installed, specifically r2dii.climate.stress.test. Note that this may require installing additional packages. You will be prompted to install these in case any are missing.
3. The input files are organized in a folder structure consistent with the one described in the vignette Set up project directories.

Prerequisites

In order to keep this vignette concise, we assume that you have successfully completed all preparation steps described in the vignettes Set up project directories.

Financial data

Financial data provide several financial indicators on the company level. If data is available you can replace our standard financial data set with a data set holding your financial information on the companies you included in the analysis.

Preparing financial data

The data that needs to be created is a csv file named prewrangled_financial_data_stress_test.csvto replace the default prewrangled_financial_data_stress_test.csv file. It holds the columns:

• company_name: character, holding the name of analysed companies.
• company_id: numeric, the id of company as classified by asset resolution. For loans workflow a placeholder value will be used.
• corporate_bond_ticker: character, holding the identifier. Will be NA for loans workflow.
• pd: numeric, holding the probability of default per company. Needs to be equal to or larger than 0 and smaller than 1.
• net_profit_margin: numeric, holding the net_profit_margin per company. Needs to be larger than 0 and equal to or smaller than 1.
• debt_equity_ratio: numeric, holding the ratio of outstanding debt to the company's equity value. This is the company's financial leverage. Needs to be larger than 0.
• volatility: numeric, holding the volatility of asset. Needs to be equal to or larger than 0.

NOTE: No column, except for corporate_bond_ticker, may have missing values.

In column company_name include all unique company names from Loans_results_company.rda, which you generated in prepare loans inputs. Running the following code will generate a dataset with all required columns. Column campany_name includes the unique company names, company_id includes a placeholder id, all other columns are empty.

library(readr)
library(r2dii.climate.stress.test)

loans_results_company_file_path <- file.path("/example_project/project_specific_input", "Loans_results_company.rda")
validate_file_exists(loans_results_company_file_path)
data <- readr::read_rds(loans_results_company_file_path)
fin_companies <- data %>%
  dplyr::select(company_name) %>%
  dplyr::distinct() %>%
  dplyr::mutate(
    company_id = 999,
    corporate_bond_ticker = NA,
    pd = NA,
    net_profit_margin = NA,
    debt_equity_ratio = NA,
    volatility = NA
  )
readr::write_csv(fin_companies, file.path("/example_project/project_agnostic_input", "prewrangled_financial_data_stress_test.csv")) # NOTE that this will overwrite financial data currently stored at the location if available

You can now open this file in a tool of your choice and fill in values for the remaining variables. For column company_id keep using a placeholder value (999 in example) and leave entries for corporate_bond_tickeras NA. Please make sure to save the result as a csv file again.

Validating financial data

Before including the file in your analysis you may want to validate that your file complies with requirements concerning structure and content. You may verify by executing the following lines of code. You will receive warning/error messages in case problems are detected.

library(readr)
library(r2dii.climate.stress.test)

financial_data_path <- file.path(
  "/example_project/project_agnostic_input",
  "prewrangled_financial_data_stress_test.csv"
)
validate_file_exists(financial_data_path)
data <- readr::read_csv(financial_data_path)
check_financial_data(financial_data = data, asset_type = "loans", interactive_mode = TRUE)

Placing file in folder structure

In order to make sure your version of prewrangled_financial_data_stress_test.csv is used in the analysis place it in

• project_agnostic_input/

as set up in Set up project directories. If the respective dataset as provided by 2DII already exists there make sure to replace it with your custom file.

Running the Stress Test with provided financial data

You can now run the stress test as described in vignette Run stress test.

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