We examine banks’ exposure to climate transition risk using a bottom-up, loan-level methodology incorporating climate … stress test based on the Merton probability of default model and transition pathways from the IPCC. Specifically, we match … loan portfolios of the twenty largest banks in the United States. Banks vary in their climate transition risk not only due …

they make illiquid loans and manage risk via on-balance sheet (non-hedged) diversification strategies"--Federal Reserve …