Credit risk assessment frameworks must significantly adapt to evaluate the unique risks of transition finance projects, especially in emerging markets.

Traditional frameworks, designed for short-term projections and immediate shocks, are inadequate for climate risk, which requires long-term, 30-year projections and consideration of various new factors.

These frameworks need to address a dynamic balance sheet, loss models, and climate-related uncertainties. Unlike standard financial models, climate risk models cannot rely on historical data or back-testing, necessitating novel, computational, and behavioral models.

Additionally, assessments must incorporate numerous variables, including emissions data, asset ownership, and potential impacts from climate-related disruptions, stranded assets, and regulatory changes.