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Climate Risk and Transition Planning in Credit Decisions

An Implementation Guide for Singapore Banking Teams

By Baibhav Bajpai

Understand what climate change and transition plans could mean for a business, its cash, and its ability to repay a loan.

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Front cover: Climate Risk and Transition Planning in Credit Decisions, by Baibhav Bajpai, with a port and industrial landscape.
Front cover Enlarge cover
Back cover, headed: A net-zero pledge does not pay next month's loan instalment. It introduces the book's practical approach to cash flow and credit decisions.
Back cover Enlarge cover
Foundation chapters
3
Practical modules
12
Teaching equations & identities
35
Analytical visuals
103

The idea, made simple

Follow the change.
Then follow the money.

A climate statement becomes useful when you can connect it to the business and the lending decision in front of you.

  1. 01

    What is changing?

    Floods, heat, energy costs, customer needs or a plan to change how a business operates.

    Name the specific change.
  2. 02

    How does it affect the business?

    Look at sales, costs, equipment and the people or services the borrower depends on.

    Explain the business effect.
  3. 03

    When is cash needed?

    Put payments, investment, expected savings and loan instalments on the same timeline.

    Check the difficult month.
  4. 04

    What should the lender do?

    Decide what evidence, financing terms, monitoring or further review the case needs.

    Record a clear next action.

One practical example

The spending can arrive before the savings.

A business may want more efficient equipment. The future savings can be useful, while the installation still creates a period when cash is tight.

The book helps you test that period, instead of relying only on a comfortable annual total.

Illustrative sequence Timing, not a forecast
  1. First

    Commit

    Pay the equipment deposit.

    Cash goes out
  2. During the change

    Install

    Meet installation costs and possible downtime.

    Cash may stay tight
  3. Later

    Operate

    Check whether the expected savings appear.

    Benefits may begin
The lending questionCan the borrower meet payments before the savings arrive?

A simplified teaching example. Actual costs, funding, savings and timing need evidence for the particular borrower.

Start with the question on your desk

A practical guide you can read your way.

Read from the foundations, or go straight to the examples that help with your current decision.

Credit & relationship teams

Will the cash be there?

Follow a borrower's cash, test the timing of a transition investment, and identify the evidence the lending proposal needs.

Start with the cash bridge, transition plans and decision controls.

Credit committees & risk leaders

What should we challenge?

Distinguish what is known from what is assumed. Ask which uncertainty could change the decision and who owns the next action.

Start with the executive quick start and decision-pack examples.

Portfolio & model reviewers

What could we be missing?

Look for shared business dependencies, understand the limits of a calculation, and test whether a result answers the right question.

Start with portfolios, model challenge and the technical reading route.

Explore the learning path3 foundations + 12 modules

Build the foundations. The three foundation chapters cover credit decisions, historical and policy context, and the language of risk and finance.

  1. M01Define the borrower, facility and decision.
  2. M02Trace how climate risks affect a business.
  3. M03Test the evidence behind a claim.
  4. M04Connect business changes to cash flow.
  5. M05Explore scenarios and stress assumptions.
  6. M06Understand default risk, exposure and recovery.
  7. M07Work through credit-loss reasoning.
  8. M08Examine how a transition plan is funded.
  9. M09Find dependencies across a portfolio.
  10. M10Challenge a model and its intended use.
  11. M11Write decisions, controls and responsibilities.
  12. M12Bring the analysis together in a capstone.

These short descriptions explain the reading path. The book contains the full chapter titles, examples, assumptions and source references.

Connect the book with practice

Try the ideas in WHYRA.

Build your understanding through short questions and learning challenges. Explore the growing learning game, then return to the book for the deeper explanation.

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Free beta. A Profitable Earth Studio account is required to play.

About the author

Baibhav Bajpai

Founder, Profitable Earth Consulting Services

Baibhav is a management consultant and financial risk practitioner. His professional background spans banking, financial services and consulting, including work at EY Singapore, Barclays and Bank of America Merrill Lynch.

In this book, he brings that practical perspective to the link between climate information, borrower cash flows and accountable credit decisions.

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