UK-based fintech Finastra and the association in climate transition Green RWA have launched the Climate-Extended Risk Model (CERM) Sandbox. The new platform offers an interactive and immersive experience for banks to understand and manage climate risks in a simple and accessible manner.

The CERM lies at the core of the Sandbox, designed to increase financial resilience in the face of climate change. The climate risk management framework comprises two main components: physical and transition risks. By integrating this into the existing capital framework, the solution extends the current credit risk model used by banks, providing a comprehensive approach for identifying long-term, global, and evolving climate risks and enabling more accurate calculations of potential losses.

Officials from Green RWA said that by launching the CERM Sandbox, they aim to provide the finance industry with a comprehensive approach to understanding and managing climate-related financial risks at a high level. This is an achievement, in line with Green RWA's goal to support energy transition financing. Also commenting on this launch, Finastra’s representatives stated that including environmental, social, and governance (ESG) factors within risk assessments has become a board-level discussion for banks.

Partnering with Green RWA is one of Finastra’s contributions towards providing the industry with tools for better climate risk management. Finastra is open by default, and they believe that open culture and technology are key for innovation and collaboration. By bringing the Sandbox to the community, they are helping the global banking industry effectively manage the impact of climate risks in their lending portfolios.

What does Green RWA do? Green RWA (Risk-Weighted Assets) is a non-profit association that firmly believes the climate transition requires the collaboration of the entire financial community. Green RWA is committed to working with financial institutions to optimise their capital budget related to climate risks. Green RWA has a global reach and has members across 4 continents, reflecting the need for international and coordinated action in the fight against climate change.

More details about Finastra Finastra is a provider of financial software applications and marketplaces, and launched the open platform for innovation, FusionFabric.cloud, in 2017. It serves institutions of all sizes, providing software solutions and services across lending, payments, treasury and capital markets and universal banking (retail, digital and commercial banking) for banks to support direct banking relationships and grow through indirect channels, such as embedded finance and Banking-as-a-Service. .