Climate Risk Assessment

Starting January 2023, Bayfront has incorporated climate risk assessment into the due diligence and ongoing monitoring process for all loan and bond investments.

Climate risk is evaluated for each loan or bond investment using three assessment tools:

  1. Climate Risk Scorecard that identifies, evaluates and scores the physical risks and transition risks of each asset;
  2. Traffic Light classification of assets into Green / Amber / Red based on alignment with decarbonisation pathway; and
  3. Financed carbon emissions intensity (measured in grams of CO2e per US$ invested) for each asset and for the consolidated AUM portfolio, using the borrower’s disclosure (where available) or estimated using industry sub-sectors emission factors.

Climate Risk Scorecard – Key Drivers

Physical Risks
  • Acute Risk: Increased severity and frequency of extreme weather events
  • Chronic Risk: Increase in mean temperatures, increased variability of precipitation patterns, sea-level rise
Transition Risks
  • Regulatory Risk: Policy/ regulatory changes (e.g. carbon taxes, energy efficiency standards, carbon footprint disclosures)
  • Technology Risk: Cost parity of renewable energy, emission abatement advancement, market eschewal of enabling tech
  • Stakeholder Risk: Shift away from carbon-intensive sectors by consumers, investors, insurers, suppliers and employees

Emissions intensity Assessment

  • Monitor the emissions intensity of Bayfront’s AUM portfolio
  • Track Bayfront’s progress against achieving the group-wide goal of Net Zero financed emissions for aggregate AUMs by 2050 and reducing our financed emissions intensity from YE2021 to YE2030 by at least 30%
KPI metrics
  • GHG Emissions intensity per unit of capital deployment of Bayfront’s consolidated AUM (tonnes of CO2e/US$)
  • Incorporates borrowers’ Scope 1-3 emissions to ensure comprehensive assessment
  • Based on the borrower’s actual disclosure (where available)
  • In case there is no disclosure, emissions intensity is estimated based on a sectoral emissions factor database which is recalibrated on a frequent basis to incorporate updated data