Our firm was selectedby the African Development Bank’s Group Risk Management Function (PGRF) toreview and strengthen the Bank’s approach to climate-related credit risk acrosssovereign and non-sovereign operations. The assignment combined internationalbenchmarking, framework development, scenario-based analysis, governancerecommendations, and practical implementation support. While centered onclimate-related credit risk, the work also addressed broader institutionalneeds relevant to governance, data, methodologies, and decision-usefulintegration of climate-related considerations into core risk and managementprocesses.
Ourfirm supported a comprehensive enhancement of the Bank’s climate-related creditrisk approach across sovereign and non-sovereign operations, combiningbenchmarking, methodology development, implementation support, and governancerecommendations.
1.Review & Diagnostic (Gap Analysis)
· Conducted a comparative assessment of AfDB’s credit riskmanagement practices against leading MDBs and DFIs, as well as relevant BaselCommittee and TCFD expectations, to identify gaps in climate-risk integration.
· Reviewed the Bank’s existing climate-related tools and assessedtheir relevance for credit risk, data use, and institutional decision-makingpurposes.
· Delivered practical recommendations on how physical and transitionrisks could be reflected in project-level climate risk classification,sovereign and non-sovereign credit assessments, provisioning, capital adequacy,and enterprise-wide stress testing.
· Developed a climate-risk assessment matrix and scoring criteriatailored to sovereign and non-sovereign lending.
· Provided guidance on integrating climate and broader ESGconsiderations into credit risk analysis, portfolio monitoring, and creditdocumentation.
2.Implementation & Climate Stress-Testing Framework
· Designed and implemented a framework to assess physical andtransition risks across the Bank’s sovereign and non-sovereign exposures.
· Built a climate impact quantification tool to translate climaterisk drivers into changes in key risk metrics and portfolio-level indicators.
· Developed and operationalized a climate stress-testing frameworkfor forward-looking analysis under multiple NGFS-aligned scenarios.
· Ran scenario analysis and climate stress tests to support riskappetite discussions, portfolio vulnerability assessment, and credit strategydecisions.
Deliveredrecommendations on governance arrangements and review cycles to support ongoinguse of climate-related methodologies within the Bank’s credit risk managementprocesses.
