The product will bring together critical risk components into a single lender-focused product, powered by a combination of climatology expertise from Ambiental and Terrafirma, alongside Hometrack’s valuation and property insights.
The product will identify the physical and transitional risk to property, both today and using future scenario modelling.
This will be aligned to the BoE climate strategy by: building awareness of climate-related risks and identifying where they exist within a property portfolio, while increasing understanding of the impact and opportunities for lenders; assessing and managing risk by translating what climate change means for lenders, such as defining the financial impact of climate change risk on a property’s value; informing investment decisions through integrating climate change risk into automated business operations, such as at mortgage originations.
The Climate Change Risk Assessment will be delivered through existing and integrated platforms, at origination and through portfolio assessment, enabling risk identification and decision management for lenders.
The product will also model the impact of climate change on property values with the use of Hometrack’s automated valuation model (AVM).
David Ross, managing director at Hometrack, said: “Climate change is a very real risk of material consequence. Average temperatures continue to increase and scientists and governments are looking at ways to reduce that impact.
“Regardless of how this plays out, every scenario will have ramifications for property values and mortgage markets.
“Along with transition risk brought about by emissions, lifestyles, transportation and energy, there are already physical risks that are manifesting as a result of climate change.
“Those risks show themselves in property desirability, safety and subsequently saleability and value.
“Our identification of that risk begins with identifying risks to the lender at the point of origination and portfolio to help them understand where their property is and what the risk of their location is.
“Our partnership with Terrafirma and Ambiental is the first of its kind and is one that we hope will deliver genuine, game-changing innovation, as we work towards solving climate change challenges for lenders worldwide.”
Rob Carling, channel sales manager at Ambiental, said: “We are delighted to be involved in this partnership with Hometrack in the development of their climate change product suite.
“It is essential that mortgage lenders take action now and consider the impacts of climate change on their portfolios for long-term planning.
“We have come a long way since launching FloodFutures, the first UK climate change model, back in 2017, and this relationship marks the start of an exciting new phase of further enhancement for the product.”
Tom Backhouse, CEO and founder of Terrafirma, added: “We are delighted to have partnered with leading property data experts Hometrack to deliver the next generation of climate risk assessment for mortgage lenders.
“As geologists, scientists and engineers, we are uniquely positioned to understand the impact that changing climate will have on ground hazards, such as subsidence, erosion and ground conditions.
“In partnering with the experts at Hometrack, we have unlocked never-before-seen insight into the impact ground hazards have on property value and saleability that can be translated into intelligence for mortgage lenders.
“Hometrack’s Climate Change Risk Assessment integrates Terrafirma’s National Ground Risk Model (NGRM): Climate, the first combined climate change and ground risk model. The NGRM: Climate models changing ground risk in UKCP18 low, medium and high emission scenarios, using a present-day risk baseline and in the short-term (2020-2040), medium-term (2040-2060) and long-term (2060-2080).
“The partnership between Hometrack and Terrafirma offers mortgage lenders with an unparalleled assessment of risk now and into an uncertain future as our climate changes. We are delighted to be a key part of a solution that will bring huge value to lenders.”
