Climate Risk Advisory for Financial Institutions

We help financial institutions strengthen the governance and management of climate-related risks by examining how these risks are identified, assessed, monitored and escalated within existing risk frameworks.

Our advisory work can include:

• Assessing climate-risk governance structures, roles and responsibilities.
• Reviewing the integration of climate-related risks into enterprise risk management (ERM).
• Evaluating risk appetite statements, policies and risk-management procedures.
• Strengthening climate-risk identification, assessment and monitoring processes.
• Supporting the integration of climate considerations into credit, investment, operational and strategic risk management.
• Reviewing the consideration of climate-related risks within ICAAP, ORSA and other relevant risk assessment processes.
• Assessing alignment with applicable regulatory and supervisory expectations, including OSFI Guideline B-15.
• Reviewing governance, processes and controls supporting climate-related disclosures and regulatory reporting.
• Improving management information, risk reporting and senior-level oversight.

The objective is to make climate-risk management more coherent, proportionate and actionable—not to create parallel processes that add complexity without improving risk decisions.

Climate scenario analysis and climate stress testing can help financial institutions explore how physical and transition risks may affect portfolios, counterparties, operations, financial performance and business strategies over different time horizons.

However, the value of these exercises depends on the relevance of the scenarios, the robustness of the assumptions and methodologies, the quality of the underlying data and the institution's ability to interpret and use the results.

We provide independent advice and review covering:

• The selection and relevance of climate scenarios.
• Key assumptions, methodologies and analytical approaches.
• The treatment of physical and transition climate risks.
• Time horizons, data quality and analytical limitations.
• The assessment of impacts on portfolios, counterparties and business activities.
• The interpretation of scenario analysis and stress-testing results.
• The consideration of climate-related risks in prudential risk assessments and capital adequacy processes, where relevant.
• The connection between analytical findings and risk-management decisions.

Our focus is not simply on producing more climate scenario analysis. It is on determining whether the analysis is fit for purpose, whether its conclusions are sufficiently supported, and what the findings mean for the institution.

Financial institutions increasingly rely on internal models, external data providers, consultants and specialized analytical tools to assess climate-related risks.

Independent challenge helps determine whether the resulting analysis is appropriate, sufficiently robust and relevant to the decisions it is intended to support.

Facultas provides independent review and challenge of:

• Climate-risk assessment methodologies and frameworks.
• Climate scenario analysis and stress-testing approaches.
• Key assumptions, data sources and analytical limitations.
• Third-party climate-risk analytics, models and related deliverables.
• The methodologies and supporting information used in climate-related regulatory reporting.
• Data, processes and controls supporting climate-related risk returns and disclosures.
• The consistency of analytical results, conclusions and recommendations.
• The use of climate-risk findings in governance, prudential assessments and risk-management decisions.

We bring a risk-management perspective to the review, focusing on the quality of the reasoning, the robustness of the conclusions and the practical implications for the institution.