Scottish Building Society (SBS) has formed a partnership with a European climate change analyst to the assess flood risks in more than £400m worth of mortgages.
It will draw on Ambiental’s predictive analytics, machine learning and expertise to forecast risks to SBS’s portfolio for up to 50 years.
The company of Amsterdam-headquartered Royal HaskoningDHV Digital estimates an additional 1.2 million properties across the UK could be at a risk of flooding by 2050.
Given that 35% of UK households have property debt – and the average value of a mortgage in the UK is £137,000 – this means £60bn in mortgage debt could be impaired due to climate induced flooding alone.
SBS chief executive Paul Denton said: “As the world’s oldest building society, it is important to ensure that we have a sustainable business for the next 173 years.
“Ambiental’s predictive technology, combined with expert analysis, models the risk of different climate change scenarios on our £400m mortgage portfolio, whether from flooding or coastal erosion.”
New guidelines to be introduced by the Bank of England require the finance sector to better analyse and disclose climate change risks.
Flood losses in Europe are expected to increase fivefold by 2050, according to the European Environment Agency.
Ambiental looked at every property on SBS’ books to build up a picture of current risks and then future risks over a 10 to 50 year timescale, based on different levels of carbon in the atmosphere and their impact on climate.
Ambiental chief executive Justin Butler said: “As the risk of flooding increases and the impact of flood events becomes more severe, organisations need new ways to see and manage their risks.
“SBS are well ahead of the curve in this respect – they now have an understanding of what the risk profile of their mortgage portfolio is today, but also how that risk profile changes into the future, and that can help them to make adjustments if they need to, or to reflect upon different business decisions to support with a sustainable mortgage book growth over time.”
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