{"id":2696,"date":"2026-03-17T11:22:52","date_gmt":"2026-03-17T11:22:52","guid":{"rendered":"https:\/\/blogs.mathworks.com\/finance\/?p=2696"},"modified":"2026-03-17T11:22:54","modified_gmt":"2026-03-17T11:22:54","slug":"crisk-a-market%e2%80%91based-framework-for-quantifying-climate-risk-in-banking","status":"publish","type":"post","link":"https:\/\/blogs.mathworks.com\/finance\/2026\/03\/17\/crisk-a-market%e2%80%91based-framework-for-quantifying-climate-risk-in-banking\/","title":{"rendered":"CRISK: A Market\u2011Based Framework for Quantifying Climate Risk in Banking"},"content":{"rendered":"<p>Effective risk management increasingly requires understanding how climate\u2011related factors can influence market valuations and balance\u2011sheet resilience. CRISK provides a transparent, market\u2011based framework for estimating the expected capital shortfall a bank might face under a climate stress scenario.<\/p>\n<p>At the MathWorks Finance Conference, <strong><a rel=\"noreferrer noopener\" href=\"https:\/\/www.linkedin.com\/in\/michaelrobbins\/\" target=\"_blank\">Michael Robbins<\/a> <\/strong>(Columbia University) and <strong><a rel=\"noreferrer noopener\" href=\"https:\/\/www.linkedin.com\/in\/arpit-narain-cfa-frm-cqf\/\" target=\"_blank\">Arpit Narain<\/a> <\/strong>(MathWorks) discussed the CRISK framework, a practical, data\u2011driven approach to incorporate climate factors into systemic risk analysis.<\/p>\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<h1>What Is CRISK?<\/h1>\n<figure class=\"wp-block-image size-large is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"http:\/\/blogs.mathworks.com\/finance\/files\/2026\/02\/CRISK-framwork-1024x554.png\" alt=\"Diagram of a climate stress\u2011test framework showing how climate science models feed into climate economics models, which inform a disorderly transition model, and ultimately flow into financial valuation network and valuation models.\" class=\"wp-image-2698\" width=\"622\" height=\"336\"\/><figcaption class=\"wp-element-caption\"><em>Climate stress\u2011test framework linking climate science, economic outputs, transition\u2011risk modelling, and financial valuation to assess the impact of climate scenarios.<\/em><\/figcaption><\/figure>\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<p>CRISK measures the <em>expected capital shortfall<\/em> a financial institution would face if a climate\u2011related systemic stress event were to occur.<\/p>\n<p>The framework builds on research from the <a rel=\"noreferrer noopener\" href=\"https:\/\/www.newyorkfed.org\/\" target=\"_blank\">Federal Reserve Bank of New York<\/a> and the academic work of <a rel=\"noreferrer noopener\" href=\"https:\/\/hyeyoonjung.net\/\" target=\"_blank\">Hyeyoon Jung<\/a>, <a rel=\"noreferrer noopener\" href=\"https:\/\/www.stern.nyu.edu\/faculty\/bio\/robert-engle\" target=\"_blank\">Robert Engle<\/a>, and <a rel=\"noreferrer noopener\" href=\"https:\/\/www.stern.nyu.edu\/faculty\/bio\/richard-berner\" target=\"_blank\">Richard Berner<\/a>, whose contributions to volatility modelling and systemic risk underpin the methodology.<\/p>\n<\/p>\n<p><strong>CRISK introduces two key components:<\/strong><\/p>\n<ul>\n<li>Climate risk factors capturing transition or physical climate shocks<\/li>\n<li>Climate beta, quantifying a bank\u2019s sensitivity to those factors<\/li>\n<\/ul>\n<p>By linking climate betas to expected capital shortfall, CRISK provides a forward\u2011looking perspective on potential vulnerabilities in the banking system using only publicly available data.<\/p>\n<div style=\"height:30px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<h1>Why CRISK Matters for Financial Institutions<\/h1>\n<p>Banks and supervisors increasingly need to quantify how climate scenarios affect capital adequacy. CRISK\u2019s appeal lies in its:<\/p>\n<ul>\n<li><strong>Transparency<\/strong> \u2014 relies on publicly available equity, debt, and climate factor data<\/li>\n<li><strong>Scalability<\/strong> \u2014 supports comparisons across firms and geographies<\/li>\n<li><strong>Interpretability<\/strong> \u2014 produces a single, intuitive metric: expected capital shortfall<\/li>\n<li><strong>Regulatory relevance<\/strong> \u2014 the method has already been replicated by a major Asian central bank<\/li>\n<\/ul>\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<figure class=\"wp-block-image size-large is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"http:\/\/blogs.mathworks.com\/finance\/files\/2026\/02\/Classic-framwork-1024x546.png\" alt=\"Diagram comparing limitations of classic risk\u2011assessment frameworks with CRISK solutions, showing how climate beta, dynamic measurement, and market data address historical, perceptual, and data\u2011reliability challenges.\" class=\"wp-image-2699\" width=\"712\" height=\"379\"\/><figcaption class=\"wp-element-caption\"><em>Classic risk\u2011assessment challenges and the corresponding CRISK solutions, highlighting how climate beta, dynamic measurement, and market\u2011data\u2011based approaches overcome common limitations.<\/em><\/figcaption><\/figure>\n<div style=\"height:30px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<figure class=\"wp-block-image size-large is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"http:\/\/blogs.mathworks.com\/finance\/files\/2026\/02\/CRISK-methodology-diagram-1024x432.png\" alt=\"Diagram illustrating the CRISK methodology, showing how a climate\u2011factor shock feeds into return equations and ultimately into the CRISK capital shortfall formula\" class=\"wp-image-2700\" width=\"653\" height=\"275\"\/><figcaption class=\"wp-element-caption\"><em>CRISK methodology: climate\u2011factor shocks and return equations feeding into the capital shortfall calculation.<\/em><\/figcaption><\/figure>\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<h1>Implementing CRISK in MATLAB<\/h1>\n<figure class=\"wp-block-image size-large is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"http:\/\/blogs.mathworks.com\/finance\/files\/2026\/02\/MATLAB-results-2-1024x540.png\" alt=\"Two line charts showing CRISK values over time for major U.S. banks. The first plot compares CRISK for Citi, Wells Fargo, and Bank of America from 2000 to 2020; the second shows CRISK time series for a wider set of banks on the same date axis.\" class=\"wp-image-2701\" width=\"641\" height=\"337\"\/><figcaption class=\"wp-element-caption\"><em>CRISK time\u2011series results for major U.S. banks, comparing individual institutions and a broader peer set across two decades.<\/em><\/figcaption><\/figure>\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<p>The presentation highlighted how MATLAB supports a full\u2011stack implementation of CRISK, including estimation, scenario integration, and deployment.<\/p>\n<p>Using MATLAB, institutions can:<\/p>\n<ul>\n<li>Build CRISK models tailored to local regulatory requirements<\/li>\n<li>Integrate climate factors from NGFS, national centres, or custom scenario sets<\/li>\n<li>Run large\u2011scale computations efficiently across portfolios<\/li>\n<li>Deploy models seamlessly to enterprise environments for reporting and auditability<\/li>\n<\/ul>\n<p>This combination of transparency, rigor, and deployment readiness makes MATLAB a strong environment for central banks, supervisors, and large financial institutions implementing climate risk analytics.<\/p>\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<h1>Advancing Climate Risk Assessment<\/h1>\n<p>As climate\u2011related risks increasingly influence creditworthiness, asset valuations, and systemic resilience, CRISK enables institutions to:<\/p>\n<ul>\n<li>Quantify vulnerabilities to transition and physical risks<\/li>\n<li>Benchmark exposures across entities or jurisdictions<\/li>\n<li>Support supervisory dialogue and stress\u2011testing exercises<\/li>\n<li>Embed climate considerations directly into capital planning<\/li>\n<\/ul>\n<p>CRISK represents a meaningful step toward a more data\u2011driven climate risk management ecosystem.<\/p>\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<h1>Learn More<\/h1>\n<ul>\n<li><a rel=\"noreferrer noopener\" href=\"https:\/\/www.mathworks.com\/videos\/crisk-quantifying-the-expected-capital-shortfall-in-a-climate-stress-scenario-1699376166849.html\" target=\"_blank\">Watch the talk<\/a> and <a rel=\"noreferrer noopener\" href=\"https:\/\/www.mathworks.com\/content\/dam\/mathworks\/mathworks-dot-com\/company\/events\/conferences\/mathworks-finance-conference\/2023\/crisk-quantifying-the-expected-capital-shortfall-in-a-climate-stress-scenario.pdf\" target=\"_blank\">Download the slides<\/a><\/li>\n<li><a rel=\"noreferrer noopener\" href=\"https:\/\/www.mathworks.com\/discovery\/systemic-risk.html\" target=\"_blank\">Systemic Risk Modeling<\/a><\/li>\n<li><a href=\"https:\/\/www.mathworks.com\/discovery\/credit-risk-modeling.html\" target=\"_blank\" rel=\"noreferrer noopener\">Credit risk modeling workflows<\/a><\/li>\n<\/ul>\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<div class=\"is-layout-flex wp-block-buttons\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-white-color has-text-color has-background wp-element-button\" href=\"mailto:climatefinance@mathworks.com\" style=\"background-color:#d78825\" target=\"_blank\" rel=\"noreferrer noopener\">Contact Us<\/a><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<div class=\"overview-image\"><img decoding=\"async\"  class=\"img-responsive\" src=\"http:\/\/blogs.mathworks.com\/finance\/files\/2026\/02\/CRISK-framwork-1024x554.png\" onError=\"this.style.display ='none';\" \/><\/div>\n<p>Effective risk management increasingly requires understanding how climate\u2011related factors can influence market valuations and balance\u2011sheet resilience. CRISK provides a transparent, market\u2011based&#8230; <a class=\"read-more\" href=\"https:\/\/blogs.mathworks.com\/finance\/2026\/03\/17\/crisk-a-market%e2%80%91based-framework-for-quantifying-climate-risk-in-banking\/\">read more >><\/a><\/p>\n","protected":false},"author":233,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[40,16,19,34],"tags":[],"_links":{"self":[{"href":"https:\/\/blogs.mathworks.com\/finance\/wp-json\/wp\/v2\/posts\/2696"}],"collection":[{"href":"https:\/\/blogs.mathworks.com\/finance\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.mathworks.com\/finance\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.mathworks.com\/finance\/wp-json\/wp\/v2\/users\/233"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.mathworks.com\/finance\/wp-json\/wp\/v2\/comments?post=2696"}],"version-history":[{"count":7,"href":"https:\/\/blogs.mathworks.com\/finance\/wp-json\/wp\/v2\/posts\/2696\/revisions"}],"predecessor-version":[{"id":2810,"href":"https:\/\/blogs.mathworks.com\/finance\/wp-json\/wp\/v2\/posts\/2696\/revisions\/2810"}],"wp:attachment":[{"href":"https:\/\/blogs.mathworks.com\/finance\/wp-json\/wp\/v2\/media?parent=2696"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.mathworks.com\/finance\/wp-json\/wp\/v2\/categories?post=2696"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.mathworks.com\/finance\/wp-json\/wp\/v2\/tags?post=2696"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}