Climate Risk Stress Testing in California: A Geospatial Framework for Banking and Climate-Exposed Sectors

TL;DR

This paper presents a geospatial framework for climate risk stress testing in California, integrating hazard mapping, sector exposure, and financial risk assessment to support climate resilience and regulatory compliance.

Contribution

It introduces a novel geospatial framework combining hazard analysis, sector exposure, and financial risk modeling for climate stress testing in California.

Findings

Framework enables assessment of wildfire, drought, flood, heat, and transition risks.

Supports portfolio monitoring and climate scenario analysis.

Provides a survey-based guide for benchmarking current practices.

Abstract

This paper develops a geospatial framework for climate risk stress testing in California with applications to banking and climate-exposed sectors such as agriculture, real estate, and tourism. The study integrates physical hazard mapping, sector-specific exposure analysis, and scenario-based financial risk assessment to evaluate how wildfires, drought, flooding, extreme heat, and transition risks may affect regional economic activity and financial stability. The framework is intended to support portfolio monitoring, climate scenario analysis, and institutional readiness under emerging disclosure and risk-management standards. In addition, the paper provides a survey-based implementation guide for benchmarking current climate-risk practices and data needs across industry and academic stakeholders.