Establishing a climate stress testing framework in banks

At Probability & Partners, we have recently started developing a climate risk stress testing framework for banks.

With the focus on mortgage portfolios, we also implemented the framework for sectoral portfolios with distinct collaterals, like data centres or moveable assets. The data, scenarios and the methodology to build the framework thus needed to be different for every portfolio. What were some of the main data issues and methodological challenges we encountered during this initiative?