Climate Impact Suite (CIS) incorporates climate risks into AD&Co’s analytical framework, and evolves our house price appreciation (HPA) model within this framework. Our LoanDynamics Model (LDM) is the other main component that will account for climate risk: LDM handles the mortgage holder’s behavioral response to such risk by modifying the likelihood of prepaying or defaulting. Climate-conditioned versions of LDM and HPA have been integrated into our LoanKinetics (LK) tool and option-adjusted spread (OAS) subroutine and are available for general use.
The way we have climate conditioned our models is a significant step forward. The framework is flexible, granular, and allows for a level of detail that does not yet exist in the realm of climate risk analytics for mortgage loans and securities. As climate models themselves evolve, improve, and provide information on a wider range of phenomena, our framework is well positioned to capture the link between borrower costs and behavioral responses.
A property level data license with a climate risk vendor, such as Corelogic, ICE or Verisk is recommended, but not necessary to use the Climate Impact Suite.
