Section 9 – Portfolio management and disclosure

Module 20 – Strategic portfolio management

Strategic portfolio management of climate risk supports regulatory compliance, strengthens resilience, and promotes long-term value creation. Key considerations include:

• Governance and cross-functional ownership

  1. Ensure board-level oversight, with clear senior management accountability for climate risk (see Module 3 and Module 4).
  2. Embed climate risk in existing risk governance, recognising it as a cross-cutting factor influencing credit, market and operational risks.

• Integration with risk appetite and strategy

  1. Regularly update the risk appetite statement, including explicit limits for high-risk sectors and geographies (see Module 5).
  2. Set long-term targets, such as 2030 or 2050 net-zero goals, with interim milestones and flexibility to reflect evolving science, policy and market conditions (see Module 19).

• Concentration risk and diversification

  1. Monitor sector and geographic concentrations – such as overexposure to drought-prone agriculture or coastal infrastructure at risk from sea-level rise – to prevent systemic risk build-up (see Module 8, Module 9 and Module 10).
  2. Account for the pace of transition across different jurisdictions, adjusting risk appetite accordingly.

• Forward-looking risk assessment

  1. Use scenario analysis (see Module 21) and stress testing (see Module 22) to anticipate how risks may evolve under different climate futures, such as severe policy shifts or increased physical hazards.
  2. Link lending and investment terms to climate performance or adaptation measures (see Module 15, Module 17 and Module 18).

• Transparency and disclosure

  1. Implement IFRS S2-aligned disclosure practices (see Module 23), clearly communicating both quantitative metrics and qualitative strategies.

Practical tips for portfolio-level climate risk analytics

FIs with diverse or decentralised portfolios often face challenges in turning detailed risk data into strategic, actionable insights. The following best practices can support portfolio analysis:

• Standardise data collection

  1. Develop modular climate risk assessment templates for use at the transaction level (see Module 8 and Module 9).
  2. Use credible national taxonomies to ensure cross-segment comparability.
  3. Collect both quantitative, such as asset location and emissions profiles, and qualitative data, such as client transition or adaptation plans wherever possible (see Module 11).

• Create a data hierarchy

  1. Map climate risks from individual exposures to sector or geographic levels, for example, total flood-exposed assets in a region, or aggregate financed emissions from a sector.
  2. Link transaction-level risk scores first to client-level, then to portfolio-level, maintaining data lineage for auditability.

• Use materiality limits as filters

  1. Apply materiality thresholds proportionate to risk appetite (see Module 5) to prioritise exposures for deeper analysis. For instance, flag clients or transactions that exceed a set emissions level or physical risk threshold.

• Apply scenario-based aggregation

  1. Use consistent scenario assumptions so that aggregated results are comparable across exposures (see Module 21).
  2. Combine scenario-adjusted metrics, such as climate-adjusted probability of default (PD), to produce portfolio-level risk measures (see Module 22).

• Create iterative feedback loops

  1. Use portfolio-level insights to refine transaction-level screening criteria, ensuring that lessons learned drive continuous improvement.

Guidance 17: Typical metrics for portfolio level climate risk monitoring

Guidance 17 presents key metrics for monitoring portfolio-level climate risk, distinguishing between baseline indicators suited to Developing-level FIs and more forward-looking metrics for Advanced-stage FIs. In practice, metrics should be decision-useful, reliable, comparable, and transparent about their methodological limitations and underlying data quality.

Developing internal dashboards for cross-functional decision-making

Internal climate risk dashboards can help turn diverse climate risk data into practical insights for stakeholders across the organisation.

• Benefits of using climate risk dashboards

  Integrating data from multiple sources

  Combine internal data such as client exposure, sector of deployment and asset location with external datasets, including climate hazard maps and policy scenario assumptions, to build a comprehensive view.

  Customising views for specific use cases

  Provide tailored dashboards for different functions such as risk management, stress testing, origination checklist, and disclosure summaries, highlighting the metrics most relevant for each use case.

  Enabling drill-down and roll-up

  Allow users to move between high-level portfolio overviews and individual transaction-level data to support root-cause analysis and the design of targeted interventions.

  Tracking progress against targets

  Link key metrics to internal and external targets, such as climate risk limits or net zero commitments, with automated progress tracking and alerts for breaches.

  Facilitating transparent reporting

  Streamline regulatory and voluntary disclosure processes by enabling the efficient collation and presentation of required information.

The goal is to ensure data flows seamlessly from the front-line to the boardroom, enabling informed, agile and forward-looking decisions in an ever-changing risk landscape.

Guidance 18: Climate risk monitoring dashboards

Climate risk dashboards act as a strategic bridge between granular due diligence data and enterprise-level decisions. Turning diverse climate inputs into decision-useful insights requires robust IT infrastructure that links internal systems with external datasets, ensuring consistency and automation.

A well-designed dashboard clarifies audience needs, from frontline staff to boards and regulators. It also informs decisions on lending, capital allocation, client escalation, and long-term balance sheet resilience through dynamic, adaptive monitoring. For external stakeholders, dashboards also enhance transparency by breaking down an institution’s climate progress in a credible, standardised format.

Guidance 18 shows examples of climate risk dashboards used by international FIs, as featured in the UNEP-FI and GARP report on supporting board-level climate risk decision-making.

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