ICE Unveils Climate Risk Solution for Bonds and Real Estate

ICE has developed a new climate transition risk solution targeting the gaps in the fixed income markets’ emissions data. The new solution targets underserved classes such as municipal bonds, mortgage-backed securities, and real estate. This expansion builds on what ICE already does: cover sovereigns, corporate equities and private companies – thus allowing clients to have financed emissions going up against the widest possible range of fixed-income asset classes.

New, through the ICE interface, Scope 1, 2, and 3 emissions are presented and run with analytics for a portfolio. This data will allow financial institutions to gain greater insight into climate risks and responsibilities, help to satisfy international agreements such as the Paris Agreement, for example, and generally enhance their compliance. For municipal bonds and MBS, which have had little to no aggregation of comprehensive climate risk data, the tool fills these critical information gaps by providing detailed insights into emissions. In RMBS, ICE points out especially residential mortgage-backed securities and on CMBS-commercial mortgage-backed securities through the use of physics-based simulations and building energy models in an attempt to generate emissions.

Larry Lawrence, Head of ICE Climate, stated that MBSs can constitute more than 20 percent of the balance sheet items for banks so reliable emissions data is essential for stress testing and regulatory disclosure. Now clients can estimate climate risks associated with their investments and complete all regulatory requirements tied to climate reporting. Coverage for this transition risk solution also includes the needs of clients for the emissions data of private corporates, thus further broadening its scope.

It uses ICE data in tracking carbon intensity and emissions from over 110 million properties and more than 4.2 million fixed income securities worldwide. ICE’s methodologies are asset class-specific, which enable accurate tracking of emissions and therefore allow users to perform an assessment of their exposure to transition risks. This wide scope of coverage allows the alignment of corporate portfolios with climate goals, as well as with regulatory expectations, thus supporting an informed decision-making process in the transition to a low-carbon economy.

This solution for ICE climate transition risk now moves to previously underserved areas in terms of emissions tracking, allowing financial institutions to have the tools at their disposal to evaluate climate risks and meet the growing demands of climate-related reporting.

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