Scottish Building Society and Ambiental partner to map flood risk on £400m of mortgages



The Scottish Building Society (SBS) has embarked on a partnership with European climate change analysts Ambiental to assess flood risks in more than £400 million of mortgages.

Paul Denton and Justin Butler (Photo: Alistair Devine)

The modelling work draws on Ambiental’s predictive analytics, machine learning and expertise to forecast risks to SBS’s portfolio for up to 50 years.

Ambiental, a company of Royal Haskoning DHV Digital, estimates an additional 1.2 million properties across the UK could be at risk of flooding by 2050.

Given that 35% of UK households have property debt, and the average value of a mortgage in the UK is £137,000, this means £60billion in mortgage debt could be impaired due to climate-induced flooding alone.

Paul Denton, chief executive of SBS, said: “In the build-up to COP26 in Glasgow, climate change is very much front of mind. As the world’s oldest building society, with 173 years of history behind us, it is important to ensure that we have a sustainable business for the next 173 years.

“We are delighted to partner with Ambiental, a world leader in the field. Their predictive technology, combined with expert analysis models the risk of different climate change scenarios on our £400million mortgage portfolio, whether from flooding or coastal erosion.”

New guidelines to be introduced by the Bank of England require the finance sector to better analyse and disclose climate change risks. Flood losses in Europe are expected to increase fivefold by 2050, according to the European Environment Agency.

Ambiental looked at every property on the Society’s books to build up a picture of current risks and then future risks over a 10-50 year timescale, based on different levels of carbon in the atmosphere and their impact on climate.

Justin Butler, CEO of Ambiental, added: “As the risk of flooding increases and the impact of flood events becomes more severe, organisations need new ways to see and manage their risks.

“SBS are well ahead of the curve in this respect. They now have an understanding of what the risk profile of their mortgage portfolio is today but also how that risk profile changes into the future, and that can help them to make adjustments if they need to, or to reflect upon different business decisions to support with a sustainable mortgage book growth over time.”

Ambiental’s FloodScore Climate is already being used for stress testing and ESG compliance in the financial sector, as well as long term financing, asset management, property investment and insurance risk underwriting.

Scottish Building Society this year announced it is partnering with Trees for Life on its mission to rewild the Scottish Highlands and support its rich and diverse wildlife. The Society is helping mitigate its own carbon footprint by supporting the charity’s pioneering conservation work on the Caledonian Forest.

Mr Denton said: “As Scotland’s building society we understand our responsibilities as a corporate citizen to reduce our carbon footprint. This ranges from looking at the ways we can limit the impact we have on the environment, to launching products to help customers make their homes and properties more energy efficient and sustainable.”



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