Strategic Shareholder Climate and Risk Financial Financial Barclays PLC 130 report information sustainability report Governance review review statements Annual Report 2022 Resilience of our strategy (continued) Barclays submitted results for the first phase of Additionally, a new requirement has been To model Barclays' exposures to these Climate Scenario Analysis this exercise in October 2021 and participated in incorporated into the Client Assessment and scenarios, existing internal approaches were Exercises and Insights the second round of submissions during 2022. Aggregation Standard, so that any lending leveraged, for example the Corporate Transition A number of external and internal scenario This stage focused on the implications of the request to a corporate defaulting under the Risk Model. analysis exercises have been continued or first-round responses to financial institutions' CBES scenario will include enhanced due Further details on this model can be found at: home.barclays/ undertaken during 2022, the details of which are + content/dam/home-barclays/documents/citizenship/ ability to manage climate risks and adapt diligence on the impact of climate change on provided below. ESG/2021/Corporate-Transition-Forecast-Model-2021.pdf business models. The CBES results were borrowers' financial conditions. Climate Biennial Exploratory Scenario (CBES) published by the Bank of England in 2022, with New bespoke approaches were also developed The CBES exercise will also inform a series of The objectives of the CBES exercise were to: (1) Barclays losses broadly in line with our banking specifically for this exercise. For example, the credit risk deep dives to be conducted in 2023, assess the magnitude of the financial exposures market share. The aggregate results of this assessment of drought combined the gross which will also take into account quantitative of the firms and financial system to climate exercise across all participants can be seen on value added curves provided by the ECB, which metrics including carbon intensity and client change; (2) understand implications and page 129. indicate the relative performance of a sector, transition plan assessments. resilience of a firm’s business model to a range of with granular physical risk data from Moody’s Insights from this exercise Further details on our Climate risk management approach different climate scenarios; and (3) improve + 427, which includes heat stress scores for over can be found from page 282. Learnings from the CBES exercise have informed firms’ management of the financial risks from 5,000 companies. The final impacts were our risk management approaches. This includes ECB Climate Risk Stress Test climate change. In order to achieve these reviewed by credit risk subject matter experts to our evaluation and assessment of elevated risk objectives, the CBES utilised three scenarios that The ECB Climate Risk Stress Test (CRST) was an ensure that impacts appeared intuitive to the sectors and enhancing our climate risk metrics test a wide variety of pathways: (1) Early Action; exploratory exercise designed to test climate scenario narrative and company specific factors. reported to Climate Risk Committee and Board (2) Late Action; and (3) No Additional Action. In stress testing capabilities and assess the financial Risk Committee. Insights from this exercise the CBES exercise, carbon prices provide an resilience of participating banks. Overall, the climate impacts from the scenarios indication of the level of transition risks in the Specifically, it explored: (1) banks’ capabilities and were considered manageable, with highest scenarios. A summary of these scenarios is progress in developing climate risk stress testing losses observed in the Wholesale Credit Portfolio included in the table below. frameworks; (2) the capacity of banks to produce under the Drought & Heat Risk scenario. We set climate risk factors; (3) the capacity of banks to CBES scenario Early Action (EA) Late Action (LA) No Additional Action (NAA) out below a heat map of losses, indicating the produce climate risk stress test projections; (4) relative impact of the climate stress scenario Description An Early and Orderly A Late and Disorderly Includes only policies in place the risks banks are facing in the form of transition against the baseline scenario used within the Transition Transition before 2021 risks (both short-term and long-term) and acute exercise. The ECB also provided general The transition to a net zero The implementation of Primarily explores physical physical risk events. This exercise was conducted feedback with respect to banks' stress-testing economy starts in 2021. policies to drive the transition risks from climate change. for Barclays Bank Ireland’s portfolio under the Carbon taxes and other is delayed until 2031 and is Here there are no new climate capabilities and its expectation that further ECB jurisdiction. policies intensify relatively then more sudden and policies introduced beyond progress will be made in the coming years. gradually over the scenario disorderly. Global warming is those already implemented. For the specific stress testing component of the A climate risk dashboard has been developed to o horizon. Global carbon dioxide limited to 1.8 C by the end of The absence of transition exercise, four scenarios were used spanning monitor risks identified and to inform Barclays emissions are reduced to net the scenario (2050) relative to policies leads to a growing multiple time horizons, emissions pathways and Bank Ireland Board Risk Committee. zero by around 2050. Global pre-industrial levels. The more concentration of greenhouse climate risk types. A summary of these scenarios o warming is limited to 1.8 C by compressed nature of the gas emissions in the is included on the next page. the end of the scenario (2050) reduction in emissions results atmosphere and, as a result, relative to pre-industrial levels. in material short-term global temperature levels macroeconomic disruption. continue to increase, reaching o 3.3 C relative to pre-industrial levels by the end of the scenario (2080).