Category: Finance

Coastal flooding in Europe ‘could cost up to €1 trillion per year’ by 2100

Coastal flooding in Europe ‘could cost up to €1 trillion per year’ by 2100

By Jocelyn Timperley, Carbon Brief

The economic damage from coastal flooding in Europe could reach almost €1 trillion per year by 2100 without new investment in adaptation to climate change, a new study finds.

The research looks at how rising sea levels and continued socioeconomic development will affect future coastal flood risk in 24 European countries.

In contrast to the past century, the main reason behind rising loses from coastal flooding will be global warming, rather than socioeconomic changes, the lead author tells Carbon Brief. The acceleration of loss is also unprecedented, he adds.

The UK would be the worst hit by far, the study finds, seeing up to €236bn in annual damages and 1.1 million people exposed to coastal flooding by 2100, if no upgrades are made to coastal protection.

Coastal damage

Europe’s coastline stretches to more than 100,000km. Many of its coastal zones are highly populated and developed.

This leaves it vulnerable to increased coastal flooding due to extreme sea levels. These arise from a combination of sea level rise, tides, and storm surges and waves due to cyclones.

Future damages due to coastal flooding will also be highly dependent on socioeconomic changes, which will impact the number of people moving to the coast and the extent of development.

The new study, published in Nature Climate Change, aims to combine modelling of both extreme sea levels and socioeconomic development to show what damages could look like this century without further adaptation efforts.

It projects that the economic damages from these extreme events will increase from €1.25bn per year today to between €93bn and €961bn per year by 2100, depending on how socioeconomic trends play out over the rest of this century. This is a 75- to 770-fold increase on today’s levels.

Three socioeconomic scenarios are considered, as set out below. (Carbon Brief recently published an explainer about these new scenarios, which are known as “Shared Socioeconomic Pathways” or SSPs.)

  • “Sustainability” (SSP1), where the world shifts gradually towards sustainability, with emphasis on more inclusive development that respects environmental boundaries. This is combined with a future emissions scenario known as RCP4.5, whereby greenhouse gas emissions level off by 2050 and global temperatures rise by 2-3C above pre-industrial levels by 2100. Expected annual damages from coastal flooding hit €156bn by 2100, the study finds.
  • “Fragmented world” (SSP3), where countries focus on achieving energy and food security goals within their own regions at the expense of broader-based development. This is combined with RCP8.5, a high emission and low climate policy scenario where global temperatures reach around 4-6C above pre-industrial levels by 2100. Expected annual damages from coastal flooding reach €93bn by 2100, the study finds.
  • “Fossil fuel-based development” (SSP5), where a push for economic and social development is seen alongside the exploitation of abundant fossil fuel resources. This is again combined with the RCP8.5 high emissions scenario. Expected annual damages from coastal flooding reach €961bn by 2100, the study finds.

The graph below shows how these annual damages for the different scenarios pan out across different European countries by 2100.

The graph below shows how these annual damages for the different scenarios pan out across different European countries by 2100.

Expected median annual damage from coastal flooding for 24 European countries by 2100. The scenarios included are: RCP4.5-SSP1 (“Sustainability”), RCP8.5-SSP3 (“Fragmented world”), and RCP8.5-SSP5 (“Fossil fuel based development”). Source: Vousdoukas et al. (2018). Chart by Carbon Brief using Highcharts.

It is worth noting that while emissions are the same for the “fragmented world” and “fossil-based development” scenarios, lower development and urbanisation leads to less economic exposure to extreme sea levels.

In all scenarios, the UK is the worst hit in absolute economic terms, followed by France and Norway. The UK – which today accounts for around a third of damages from coastal flooding – accounts for 22-28% of damages in Europe by 2100.

Dr Michalis Vousdoukas, an oceanographer at the European Joint Research Centre in Ispra, Italy, and lead author of the paper, tells Carbon Brief the high expected damages in the UK are due to its exposure to the oceanic waves of the North Atlantic. This is one of the most energetic areas in the world, he says, leading to more intense weather conditions than in Mediterranean countries, for example.

Dr Andra Garner, a postdoctoral fellow in sea-level research at Rutgers University in New Jersey, who was not involved with the research, says the results of the paper are “very telling”, although emphasises that any modelling study comes with caveats. She tells Carbon Brief:

“The results here indicate that, although socioeconomic choices can be important, rising sea levels ultimately dominate future flood risk in many regions, suggesting the need for swift action towards increasing adaptation measures and resilience planning in coastal communities.”

This is especially important, adds Garner, since the ocean responds slowly to a warming climate, which means that sea level rise impacts are likely to become even more severe beyond the end of the century.

Nearer-term damage

The authors also looked at damages from coastal flooding in the shorter term. By mid-century, the study shows these would reach €21bn, €13bn and €39bn for, respectively, the “sustainability”, “fragmented world” and “fossil fuel-based development” scenarios. This is a 10- to 32-fold increase compared to the annual damage in 2000.

The breakdown of these costs among different countries by 2050 is shown in the chart below. In all scenarios, the UK is again the most affected in absolute terms, followed by France and Italy.

Expected median annual damage from coastal flooding for 24 European countries by 2050. The scenarios included are: RCP4.5-SSP1 (“Sustainability”), RCP8.5-SSP3 (“Fragmented world”), and RCP8.5-SSP5 (“Fossil fuel based development”). Source: Vousdoukas et al. (2018). Chart by Carbon Brief using Highcharts.

According to the study, flood defences will need to be installed or reinforced to withstand increases in extreme sea levels of around 0.5m by 2050, and 1-2.5m by 2100, depending on the country.

GDP ratio

The researchers also calculate the expected annual damages from European coastal flooding as a share of combined total gross domestic product (GDP).

Depending on the scenario, they find that coastal flooding damages will account for 0.06-0.09% of Europe’s GDP by 2050. This rises to 0.29-0.86% of GDP by 2100. This is up from current average damage from coastal flooding in Europe today of around 0.01% of GDP.

Some countries are particularly hard hit, when viewed in this way. The study finds Norway would see damages equal to between 1.7-5.9% of its GDP, depending on the scenario, by 2100. Damages in Cyprus would equal 1.7-8.3% of its GDP and in Ireland it would be 1.8-4.9% of GDP.

A key point here is that river flooding in Europe is currently much more damaging than coastal flooding in GDP terms, the study says, with an average €6bn in annual damages, equivalent to around 0.04% of GDP.  This will change, according to the study, with flood risk increasingly dominated by coastal flood risk from 2050 onwards, unless flood-protection standards are upgraded. Vousdoukas tells Carbon Brief:

“In the future, the coastal flooding becomes four times more important than river flooding, because of the accelerating factor which is sea level rise basically. Coastal flooding will change so much, there will be so higher damages, that it will become more important. Then there needs to be spending there for protection.”

People affected

As well as looking at economic damages, the new study projects the number of people who will be affected by coastal flooding. This depends not only on the extent of increase in extreme events, but also how many are living in coastal zones. Therefore, as for economic damages, socioeconomic development will have a large impact alongside climate change.

The study finds the annual number of people in Europe exposed to flooding will rise from 102,000 today to between 530,000 and 740,000 by 2050 (again, in the absence of further adaptation measures). By 2100, 1.5 million Europeans would be affected by coastal flooding in the “fragmented world” scenario, the study finds, and 3.7 million in the “fossil fuel-based development” scenario.

The three graphs below show the projected number of people affected in each country for the three scenarios in 2100. Again, the UK is by far the most impacted across all three scenarios.

Expected median number of people affected by coastal flooding per year in 24 European countries in 2100. The scenarios included are: RCP4.5-SSP1 (“Sustainability”), RCP8.5-SSP3 (“Fragmented world”), and RCP8.5-SSP5 (“Fossil fuel-based development”). Source: Vousdoukas et al. (2018). Chart by Carbon Brief using Highcharts.

High uncertainty

It is important to remember that the projections in the study come with a very high uncertainty, Vousdoukas stresses.

The chart below shows the projected change of coastal flood impacts up to 2100 for the three scenarios. The dotted line show the median projections, as described above, while the coloured areas show the large potential range in the results.

Evolution of coastal flood impacts aggregated at European level for 24 countries under three socioeconomic scenarios: (a) shows the projected changes in expected annual damages and (b) the expected annual number of people exposed due to coastal flooding. The lines are the ensemble median projections and the coloured areas show the 5-95% quantile range confidence interval. Source: Vousdoukas et al. (2018)

Commenting on the paper, Dr Diego Rybski, deputy head of climate change and development group at the Potsdam Institute for Climate Impact Research tells Carbon Brief the paper “significantly contributes” to the understanding of coastal flood risk and sea level rise in Europe. However, he adds that such assessments of coastal flood risk are affected by further large uncertainties.

For example, he says, it is hard to know when the inundations are going to take place because coastal flood are very rare. The impact of a once-in-100-year event in the first half of the century could be very different than if it occured in the second half of the century. It is also possible that there is no such event, or more than one, during a given 100 years.


Vousdoukas, M, I. et al. (2018) Climatic and socioeconomic controls of future coastal flood risk in Europe, Nature Climate Change, . doi:10.1038/s41558-018-0260-4

This article originally appeared on Carbon Brief and is shared under a Creative Commons license. Read the original by clicking here.

Cover photo by grumpylumixuser/Wikimedia (CC BY 3.0): Flooding on Piazza San Marco, Venice, Italy.
Climate gentrification to impact real estate market

Climate gentrification to impact real estate market

By Caroline Fouvet

While an ocean view from a balcony often implies higher property prices, this trend seems to be reversed as sea level rise and climate-change-triggered flooding unfold. In 2016, in the United States alone, four inland flooding events amounted to US$ 4 billion, in a country where inundations are the costliest and most common natural disaster. Coastal cities such as Miami and New York City are even more vulnerable to flooding, and are ranked first and second in the list of places most at risk from climate change and sea-level rise.

Such effects are likely to cause displacements, reshaping urban settlements and the socioeconomic status of neighbourhoods. This is what a new Harvard study that looked at climate change impacts on property markets in Miami-Dade County, Florida, suggests. The authors found a correlation between the higher elevation of single-family properties and their rate of price appreciation. Similarly, the research demonstrates that since 2000 the price appreciation of homes at lower elevations was inferior to that higher properties.

This imbalance demonstrates that the perception of flood risks is likely to shift consumer preferences and trigger relocation. As a result, the question arises how vulnerable communities can move to flood-risk-free zones, given the increases of property values in those areas. This situation illustrates the issue of climate gentrification, or how property value fluctuations based on a building’s climate resilience can lead to speculation and investment, forcing lower-income population out of climate proof areas.

The research points out three ways for climate gentrification to manifest:

  1. The “superior investment pathway” is a situation where high-income households opt for safer locations, as illustrated in the study.
  2. Under the “cost-burden pathway” assumption, only richer segments of the population can afford to live in climate vulnerable areas and to pay the associated costs of insurance and repair.
  3. Lastly, the “resilience investment pathway” relates to engineering and infrastructure investments in homes, that drive up property value and exclude those who cannot provide for it.

Climate change impacts on the real estate market are a topic not only for local authorities and urban planners to watch, but also for investors. Part of the methodology designed by Acclimatise, UNEP FI and 16 leading banks for banks to assess climate risks to their loan book covers real estate and estimates the potential changes in property values and loan-to-value ratios due to extreme weather events. A complex interplay of factors, including risk perception, are considered in the analysis. Evidence shows for instance that updating flood risk maps changes beliefs around the riskiness of newly designated flood-prone areas, driving down properties’ sale prices by 12% to 23%. Moreover, the report describes that the value of unaffected properties can increase compared to that of affected properties in the same area, as well as the value of homes that have undergone maintenance and resilience enhancement works following an extreme event.

As both the incremental and acute impacts of a changing climate manifest themselves globally, so do their financial costs. The real estate sector is already impacted, and future trends seem to point toward increasing damages. Improving the resilience of homes is a necessary adaptation measure, but this must go hand-in-hand with careful consideration of communities’ socioeconomic status to avoid a two-tier system for urban development.


Cover photo by Ryan Parker on Unsplash.
In a warming world, access to cooling is an everyday essential

In a warming world, access to cooling is an everyday essential

By Elisa Jiménez Alonso

A recently released report by Sustainable Energy for All finds that 1.1 billion people around the world face immediate risks from insufficient access to cooling. According to the report, access to cooling is an important emerging opportunity in climate adaptation innovation.

Rachel Kyte, CEO and Special Representative to the United Nations Secretary-General for Sustainable Energy for All, said “In a world facing continuously rising temperatures, access to cooling is not a luxury – it’s essential for everyday life. It guarantees safe cold supply chains for fresh produce, safe storage of life-saving vaccines, and safe work and housing conditions.”

The study shows that access to cooling is very much tied to wealth. Of the 1.1 billion people at immediate risk, 470 million are in poor rural areas and 630 are in hotter, poor urban slums. These people are also concentrated in nine countries across Asia, Africa and Latin America: India, Bangladesh, Brazil, Pakistan, Nigeria, Indonesia, China, Mozambique and Sudan.

Cities, communities, and country leaders are asked to consider cooling action plans in order to close the access to cooling gap. Additionally, the Kyte points out that for companies that produce HFC-free, affordable air conditioning devices there is an enormous market opportunity out there.

In addition to the 1.1 billion rural and urban poor at immediate risk, the report identifies 2.3 billion people from the increasingly affluent lower-middle class, on the brink of being able to afford air conditioning, and 1.1 billion belonging to the established middle class, many of whom own air conditioning units but may able to upgrade them to more efficient ones.

This also ties into findings recently presented in a report completed by Acclimatise with UNEP FI and sixteen leading international banks. The report focuses on climate-related physical risks and opportunities to the banking sector. One of the examples named is an increased demand for loans for home improvements in order to cool houses where it was previously unnecessary.

While cooling is increasingly becoming a necessity, it is also a very energy-intensive measure. Increased cooling from HFCs and using fossil fuel powered energy can lead to more warming. In Mumbai alone, 40% of power use comes from air conditioning. Thus, phasing out HFCs, for instance through the Kigali Amendment, and the continued investment in renewable energy sources should remain priorities.

At the same time, urban development and real estate have the opportunity to radically rethink how buildings and cities can be designed in order to optimize cooling. In India, for example, 75% of the buildings required by 2030 have yet to be built, offering a massive opportunity to be innovative and provide cooler cities and housing.

Download the report by clicking here.


Cover photo by  PDPics/Pixabay (public domain): Mumbai skyline.
16 of the world’s leading banks collaborate to tackle physical risks of climate change

16 of the world’s leading banks collaborate to tackle physical risks of climate change

Note: Global briefings to the industry will be carried out via webinars on 14 August – scroll down for more information.

By Will Bugler

Sixteen leading banks, UN Environment Finance Initiative (UNEP FI) and Acclimatise, have published new methodologies that help banks understand how the physical risks and opportunities of a changing climate might affect their loan portfolios.

The methodologies, published in the report “Navigating a new climate”, were piloted across three climate-sensitive industry sectors: agriculture, energy and real estate. Using the methodologies, banks can begin to assess physical climate risks in their loan portfolios, evaluating the impacts on key credit risk metrics – Probability of Default (PD) and Loan-to-Value (LTV) ratios. The forward-looking assessments offer longer-term insights that go beyond the usual stress-testing horizon of 2-3 years.

“This report provides a practical way to assess the physical risks of climate change, which we have piloted on our real estate mortgage portfolio to consider how flood risks could impact Barclays’ customers now and in the future,” said Jon Whitehouse, Head of Government Relations & Citizenship, Barclays, “this type of assessment helps us to manage climate change risk and opportunity, both at a transactional and portfolio level.”

The methodologies are designed to enable banks to be more transparent about their exposure to climate-related risks and opportunities, in line with the recommendations of the Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD).

“The physical impacts of climate change may pose a risk to banks’ loan portfolios. The innovative methodologies…provide foundations which can be built upon, as research and data analytics improve,” said Acclimatise’s Chief Technical Officer, Dr Richenda Connell. “Once banks understand the scale of the risks, this will be a milestone that will encourage other corporates to take climate risk management seriously. Building resilience to physical climate impacts also presents banks with investment opportunities. Those that understand this best will have a competitive advantage.”

The methodologies demonstrate that physical risks will worsen if the global economy continues on its current greenhouse gas emissions pathway. Future negative impacts could be reduced somewhat, but not avoided completely, if strenuous and rapid efforts are made globally to cut emissions.

The guidance also aims to inform banks’ strategies to support clients in adapting to changing conditions. Clients who face physical risks may need to make investments to become more climate-resilient. What’s more, global markets are developing for providers of climate-related products and services, as companies such as engineering and technology providers are identifying opportunities to capitalise on shifting market trends. Banks may have opportunities to support these investments.

A separate, complementary report focused on the assessment of transition risks and opportunities, was published in April.

“For financial institutions and other market actors, effectively managing and responding to climate change always means two things: understanding and responding to the intensifying physical impacts of unavoidable climate change; and also mitigating the risks and seizing the opportunities from the decarbonisation of the economy,” said Eric Usher, Head of UNEP Finance Initiative.

“We are proud of our collaboration with these 16 leading banks and Acclimatise in the development of methods and tools that will help the global financial industry respond to climate change in a holistic manner, spanning both the physical and transition dimensions of the challenge.”

The banks leading this work and currently piloting the methodologies are ANZ, Barclays, BBVA, BNP Paribas, Bradesco, Citi, DNB, Itaú Unibanco, National Australia Bank, Rabobank, Royal Bank of Canada, Santander, Société Générale, Standard Chartered, TD Bank Group and UBS.

Download a copy of the ‘Navigating a new climate’ report from here.

For more information, please contact Acclimatise’s communications team:

Will Bugler w.bugler@acclimatise.uk.com and Elisa Jiménez Alonso e.jimenez-alonso@acclimatise.uk.com

Webinar details

Assessing climate-related physical risks in the banking industry: Outputs of a working group of 16 banks piloting the TCFD

This webinar will discuss the results of a collaboration between sixteen of the world’s leading banks with UN Environment Finance Initiative (UNEP FI), and climate risk and adaptation advisory firm Acclimatise. The banks set out to develop and test a widely applicable scenario-based approach for estimating the impact of climate change on their corporate lending portfolios as recommended by the Recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).

The Webinar will focus on the physical-related risk and opportunities, which is the risk resulting from climate variability, extreme events and longer-term shifts in climate patterns, and constitutes the second in a two-part series publishing both the physical risk and transition risk assessment methodologies developed through the Working Group’s collaboration.

After registering, you will receive a confirmation email containing information about joining the webinar.

 

Can blockchain unblock climate finance?

Can blockchain unblock climate finance?

Funders’ perceptions that there is too much risk in investing at the local level prevents climate finance from making a real difference. Sam Greene discusses whether new technologies can benefit local communities while delivering the confidence donors and investors need to put their money where it matters.

By Sam Greene, IIED

Climate finance is not getting to the people who need it most – vulnerable communities on the front line, hardest hit by the impacts of climate change but least able to respond. IIED estimates only 1 in 10 dollars of the $60bn in public and private climate finance from dedicated climate funds is directly committed to local level activities.

Local communities know what works and have ingenious and sustainable solutions for adapting to climate change. But cut out of the funding picture, they have almost no say in how or where the bulk of the money is spent.

IIED is exploring the barriers stopping climate finance reaching local people. Part of this is examining emerging innovations in technology that can break those barriers. We are considering the role that blockchains, artificial intelligence, GPS satellites and advanced data platforms might play enabling finance to flow.

A risky business?

One major blockade is perceived risk: donors and investors do not have confidence in local level institutions’ (e.g. small business, local government authorities) financial systems, in their ability to spend money effectively and are wary of having no means of holding them to account. The distance between international and local actors makes it harder for funders to know what is happening ‘on the ground’.

Emerging technologies may help to circumvent this barrier. It’s been hard to miss the blockchain hype – decentralised ledgers that make the transfers of funds or assets between people or organisations fully transparent. Blockchains can record transactions of anything of value such as money, land, or identities, as well as assurances of impact or change delivered by an investment.

And being a decentralised system, costly intermediaries become redundant as investors, governments or communities can transfer funds or other assets directly between each other faster and at less expense.

The video below was made by the World Economic Forum to explain some of the benefits of blockchain technology.

With the potential for such a radical shake up in the transparency of transactions, could blockchains be the key to increasing funders’ appetite for climate finance investments?

Blockchains in practice

Digital “smart” contracts are programmed to automatically trigger payments when certain conditions are met.

Gainforest is using smart contracts to incentivise small-scale Amazonian farmers to preserve the rainforest. Farmer ’caretakers’ receive rewards for preserving patches of rainforest over a 3-6 month period. The reward is crowdfunded by private individuals or institutional donors and the size is determined by the difficulty in preserving the particular area of land.

When remote sensing satellites verify a particular patch of forest is still standing, the smart contracts enable payments to be sent automatically to the farmers. Since satellites independently verify the status of different patches, these transactions are significantly more transparent and can be trusted by donors. And with no ’middle-men’ transferring funds, administrative costs are cut dramatically.

Bitland in Ghana is using blockchain technology to create an immutable, transparent record of land ownership using drones, remote sensing and field-level research to enhance the data. Clear, public records of who owns what can help tackle corruption, illegal land grabbing and costly local border disputes that thrive on poor data and incomplete or unavailable written records. Clear records of ownership can transform local peoples’ access to finance – as they can prove ownership of their land and secure credit by borrowing against it.

Risks and challenges

However, there are challenges – such as the significant energy needed to maintain blockchains. Accessibility is also an issue: all users must have reliable internet access and enough technological literacy to access and review blockchain data.

There are also risks. Since the distributed ledger is transparent and immutable, its value rests on the quality of data that populates it. And the choices of information put onto ledgers, or the conditions set for smart contracts are highly political. Blockchains may entrench uneven power dynamics between donors and recipients. If smart contract conditions are set by donors, the needs of the recipient risk being overlooked. Can this power dynamic be shifted to a model where both donor and recipient ‘own’ the conditions, enabling both groups to hold each other to account? How can we ensure that these kinds of contracts preserve trust within and between communities?

Exploring the barriers to local-level climate finance

Blockchain technology is still an unknown quantity and a wave of local-level investment is unlikely until the various obstacles are addressed. These include:

  • high energy demands to power blockchains
  • the potential for blockchains to become cumbersome as more users and data is added
  • issues of fairness, recognising that the most vulnerable will only benefit if they have internet access and user-friendly, local language platforms to review ledger data
  • a skewed power dynamic where investors and donors set smart contract conditions that may not reflect local priorities.

At a workshop in early July, we’ll be bringing together donors, investors, innovators and community funds to explore the potential of Blockchain and other new technologies, and whether these new platforms can help tackle perceived risk in local level climate finance investments.


This blog was originally published on IIED’s website and is shared under a Creative Commons license. Read the original blog here.

Cover photo by Joel Filipe on Unsplash.
Event summary: Advancing TCFD guidance on physical climate risks and opportunities

Event summary: Advancing TCFD guidance on physical climate risks and opportunities

On 31st May 2018, the European Bank for Reconstruction and Development (EBRD), in partnership with the Global Centre of Excellence on Climate Adaptation (GCECA), held the conference Advancing TCFD Guidance on Physical Climate Risks and Opportunities. The EBRD welcomed the opportunity to host this event as a supporter of the Task Force on Climate-related Financial Disclosures (TCFD). The EBRD is the first multilateral development bank to officially join over 280 supporter organisations in becoming a supporter of the TCFD and of its recommendations on including climate-related information – both risks and opportunities – in financial disclosures.

The event launched the EBRD-GCECA report that builds on the TCFD recommendations and presents practical guidance for corporates looking to disclose their risks and opportunities with regard to physical climate impacts. This report is the result of a six-month dialogue between industry-led working groups composed of representatives of corporates, financial institutions and regulators.

In light of the report’s 18 recommendations, the conference facilitated discussion and reflections on the relevance of physical climate-related risks and opportunities to financial markets. Three panels, gathering corporations, banks, regulators, asset managers, rating agencies, and others were convened to discuss the practical implementation of physical climate-related disclosure metrics by corporations.

Download the flagship conference report and other conference materials.

Event summary

The conference was opened by Josué Tanaka, EBRD Managing Director, and Pierre Heilbronn, EBRD Vice President, who welcomed the audience and set the scene by highlighting EBRD’s long-standing commitment to financing the transition to a low-carbon and climate-resilient economy.

Henk Reinders, speaking on behalf of the Dutch Central Bank DNB, stressed the role that regulators must play regarding physical risk. Curtis Ravenel, Global Head of Sustainable Business and Finance at Bloomberg, presented TCFD recommendations related to physical climate risks and opportunities, and the challenges related to their eventual identification on balance sheets. Roelfien Kuijpers, Head of Responsible Investments and Strategic Relationships at DWS, encouraged investors to address physical climate disclosures through shareholder engagement to support a “just transition” that addresses the equity implications of repricing exposed assets. She also called on regulators to support this effort by requiring sector-based climate-related disclosure protocols and helping develop a new climate analytics industry.

The first panel ‘Advancing TCFD recommendations on physical climate risks and opportunities’ gathered the three chairs of the working groups who presented the EBRD-GCECA report’s findings. Murray Birt, DWS, stressed the importance of assessing climate risks over longer timeframes of assets and instruments, disclosing information on the location of critical facilities, providing detailed information on the financial impacts of recent extreme weather events and weather variability on facilities and value chains, as well as forecasting financial impacts of future physical climate risks. Simon Connell, Standard Chartered Bank, focused on opportunities, defined as increasing the resilience of existing assets to current and future physical climate risks, along with identifying new markets and product demand that may emerge as a result of shifting climate patterns. He highlighted the importance of identifying and disclosing physical climate-related opportunities at the segment level as well as wider co-benefits from climate resilience investments. Greg Lowe, Aon, explained that physical climate scenarios constitute a critical tool to ensure better capital allocation, as they provide useful views of plausible futures. As such, the analysis of physical climate scenarios requires an exploration of different GHG pathways and their impacts on climate and weather systems. Finally, Craig Davies, EBRD, presented the Bank’s efforts to support market transformation toward climate resilient economies by mobilising wider market action through developing new ways of sharing market information about physical climate change impacts.

The second panel ‘Managing physical climate risks and opportunities – experience to date’ brought together physical climate risk disclosure preparer and user perspectives, as Maersk, Citi, Bank of America Merrill Lynch, and Moody’s shared their experiences on the management of physical climate risks and opportunities. While their experiences to date varied, panellists all welcomed the TCFD framework as a means to bring physical climate risks and opportunities under deeper scrutiny in their organisations. The need for engagement emerged as an important theme from the panel. The interdependencies between financial institutions and corporates, and in turn between corporates and their supply chains, was said to require new relationships and engagement at multiple levels – both externally and internally. Another takeaway was the desire to strike the right balance between disclosures that are useful for financial institutions and for corporates’ strategic purposes. In these early stages of physical climate risk analysis and disclosure, what is truly ‘decision useful information’ is yet to be determined, though panellists maintained that the new EBRD-GCECA report goes a long way to provide guidance on this issue.

The third panel ‘How to include physical climate risks and opportunities in financial disclosure’ capped the event, bringing together financial regulators and government actors, as well as the voluntary disclosure perspective. Jean Boissinot, French Treasury, noted that while there is now room for further regulation on physical climate risk disclosures, regulators need to think carefully about it to ensure it results in information that is complementary, enabling information flows, and is aligned with other initiatives such as the TCFD. Mark Cornelius, Bank of England, discussed the Bank’s current information gathering initiative in the insurance and banking sectors and ensured the Bank and its regulatory functions are highly supportive of initiatives like TCFD that are by and for the market. Simon Messenger, Climate Disclosure Standards Board, commented that stronger regulation can help standardise physical climate-related disclosures. Antoine Begasse, European Commission, agreed that regulators have a role to play, but that regulation needs to be fit for purpose to generate comparable information from industry. In this light, the Commission is launching a public consultation on strengthening reporting requirements, and developing a taxonomy of adaptation (and mitigation) finance including metrics to be used in climate-related disclosures, to be integrated into regulation and to support climate-related reporting.

Closing remarks were provided by Roald Lapperre, Deputy Minister at the Netherlands Ministry of Infrastructure and Water Management, Curtis Ravenel of Bloomberg, and Josué Tanaka of EBRD. The host concluded that the disclosure process is happening, and that TCFD and the emerging EU sustainable finance approach provide useful frameworks. It was also recognised the tension between the need for consistency and the need for sector-specific metrics. Ultimately, there is high demand to translate awareness of physical climate risks and opportunities into metrics that can influence the decisions made by businesses and financial institutions.

Key Takeaways

  • Physical climate-related disclosures are part of an iterative process and constitute a learning exercise for corporations and financial institutions. They will need to include both quantitative and qualitative elements, to avoid the publication of commercially-sensitive data related to the provision of detailed climate risk information.
  • Disclosures and scenario analysis are not an end per se. The analysis of physical climate risks and opportunities should be about strategic analysis as much as it should be about disclosure.
  • There is a general need for better and more granular data provision on corporates’ facilities, their importance and their location. The information can come from universities and analytics firms as well as from better engagement between investors and clients.
  • Better disclosures of physical climate risks and opportunities will arise from a cooperative working process to ensure learning and awareness-raising between the following actors: banks (involving all teams including credit risk, industry teams and sustainability departments), investors asking questions to companies in which they invest, along with the latter assessing their whole value chain.
  • The long-term horizon is relevant for physical climate scenario analysis, as due diligence processes usually entail longer timeframes, and relationships with clients extend over the longer term.
  • The development of guidance and protocols on physical climate-related disclosures should be pursued. They should support market participants in increasing their climate risk awareness and the focus includes both acute and chronic physical climate risks. Regulators need to ensure that any new climate disclosure regulation results in information that is complementary, enabling information flows, and aligned with other initiatives such as TCFD.
  • MDBs have a role to play in ensuring that emerging economies are not left behind as new regulatory and market practices on climate-related disclosures emerge. They can support businesses and financial institutions in emerging markets to adopt and keep up with evolving best international practices on climate-related disclosures, for example through supporting skills transfer, capacity building and policy dialogue, as well as exploring the development of new financing instruments that include e.g. the appropriate use of concessionality and calibrated loan pricing.
  • The TCFD provides a useful framework for the analysis of climate risk and opportunities. Together with the EU sustainable finance approach, it is the push many corporates need to get started on their journey to uncover physical climate risks and opportunities. Growing awareness on physical climate risks and opportunities needs to translate into the development and use of robust metrics that inform better market decisions and the more rational allocation of capital in the light of information about physical climate change impacts.

Download the flagship conference report and other conference materials.


More on the initiative

The initiative was hosted by EBRD which also funds its technical secretariat. The GCECA provided a secondment to the technical secretariat. The technical secretariat was facilitated by Acclimatise, a specialist consulting company advising major corporates and financial institutions on climate risk and resilience, and by Four Twenty Seven, a firm providing market intelligence on the economics of climate change.

Participants involved in the expert working groups included: Agence Française de Développement, Allianz, APG Asset Management, AON, the Bank of England, Barclays, Blackrock, Bloomberg, BNP Paribas, Citi, Danone, the Dutch National Bank, DWS Deutsche AM, European Investment Bank, Lightsmith Group, Lloyds, Maersk, Meridiam Infrastructure, Moody’s, S&P Global Ratings, Shell, Siemens, Standard Chartered, USS and Zurich Alternative Asset Management.


Information about further updates and events will be posted on the website www.physicalclimaterisk.com. If you require further information about any of these activities, please contact physicalclimaterisk@ebrd.com.

The event attracted significant media attention and was reported by the New York Times, Reuters and Environmental Finance.

Major new report on physical climate risk to financial sector released

Major new report on physical climate risk to financial sector released

Financial institutions should undertake comprehensive climate risk assessments and disclose material exposure to climate hazards such as flood risk, water stress, extreme heat, storms, and sea level rise, according to a new report released today by the European Bank for Reconstruction and Development. The report focusses specifically on physical climate risks to the financial sector and calls for firms to integrate climate impacts into investment decisions.

The report, published today at a conference hosted by EBRD and the Global Centre for Excellence on Climate Adaptation (GCECA), presents guidance and recommendations developed over the last year by industry-led working groups that include representatives from AFD Allianz, APG, Aon, Bank of England, Barclays, BlackRock, Bloomberg, BNP Paribas, Citi, Danone, DNB, DWS, The Lightsmith Group, Lloyds, Maersk, Meridiam Infrastructure, Moody’s, the OECD, S&P Global, Shell, Siemens, Standard Chartered, USS and Zurich Asset Management. An expert team led, by Acclimatise and Four Twenty Seven served as the secretariat to the working groups throughout the course of the meetings.

The report, Advancing TCFD guidance on physical climate risks and opportunities”, also recommends that firms investigate benefits from investing in resilience and opportunities to provide new products and services in response to market shifts. In order to do this, the report calls for organisations to use scenario analysis and incorporate long-term climate uncertainties into business planning and strategic decisions.

The report and the conference, respond to calls for strengthening financial stability in the face of climate change uncertainties, through the disclosure of climate-related market information.  This was the core message, delivered last summer, of the Task Force on Climate-Related Financial Disclosures (TCFD), initiated by the Financial Stability Board (FSB) in response to a call from the G20 economies.


The report is available on a dedicated website www.physicalclimaterisk.com, as are opinion pieces from heads of working groups and other leading experts.

Download the report’s executive summary here.

Cover photo by Ryan L.C. Quan/Wikimedia Commons (CC BY-SA 3.0): Looking downtown from Riverfront Ave in Calgary, during the Alberta floods 2013.
TCFD recommendations: EBRD to host physical climate risk conference on 31 May

TCFD recommendations: EBRD to host physical climate risk conference on 31 May

By EBRD

The European Bank for Reconstruction and Development (EBRD) and Global Centre of Excellence on Climate Adaptation (GCECA) are hosting an event “Advancing TCFD guidance on physical climate risk and opportunities”, which will be held on 31 May 2018 at the EBRD’s headquarters in London.

Findings about physical climate risk and opportunity disclosure by industry-led working groups, which have been meeting at the EBRD’s headquarters since 2017, will be released at the conference.

This event will build on the recommendations of the TCFD, headed by Mark Carney and Michael Bloomberg. These recommendations highlight a growing concern over the effects of climate change on the economy and financial markets, and the need for investors to be able to assess climate-related risks.

At the conference, senior representatives from the financial, business and regulatory communities will discuss the development of metrics for disclosing physical climate risk and opportunities, and the integration of these disclosures into decision-making.

The confirmed high-level speakers at the conference will include:

  • Suma Chakrabarti, President, the EBRD
  • Roald Lapperre, Netherlands Deputy Minister for Infrastructure & Water
  • Frank Elderson, Executive Director, DNB (Netherlands Central Bank).

The panelists will represent a rich variety of market leaders such as Aon, Citi, Google, Maersk, Moody’s and Standard Chartered, as well as the Bank of England, the French Treasury and the European Commission.

Findings from the expert working groups will also be published. The working groups include representatives from Allianz, APG, Aon, Bank of England, Barclays, BlackRock, Bloomberg, BNP Paribas, Citi, DNB, DWS, Lightsmith Group, Lloyds, Meridiam Infrastructure, Moody’s, OECD, S&P Global, Shell, Siemens, Standard Chartered, USS and Zurich Asset Management. An expert team led by Acclimatise and Four Twenty Seven is providing the Secretariat function to the working groups.

TCFD recommendations, released for the G20 summit in June 2017, call for the inclusion of metrics on physical climate risk and opportunities into financial disclosures by corporations and financial institutions. This is echoed in the recommendations of the European Union’s High Level Expert Group on sustainable finance, released in January 2018, and the Action Plan from the European Commission released in March 2018.


Read the original press release on the EBRD website.

Cover photo by Riccardo Chiarini on Unsplash
New knowledge hub helps companies implement TCFD recommendations

New knowledge hub helps companies implement TCFD recommendations

By Elisa Jiménez Alonso

The newly launched TCFD knowledge hub hosts a range of resources that help companies identify, analyse and report climate-related financial information. It was created to support the implementation of the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and the development of high-quality, consistent and comparable climate-related financial disclosures.

The hub offers two main ways to access resources:

  1. Search the database to find a specific resource relating to the themes and topics covered in the TCFD recommendations.
  2. Be guided through the 4 thematic areas, the recommended disclosures and scenario analysis with helpful suggestions of the most relevant resources to start implementing the recommendations.

Acclimatise supported the launch of the TCFD Knowledge Hub by providing a range of relevant resources that are now available through the portal. We welcome this new library of resources supporting the adoption of the TCFD recommendations by a wide range of companies. As our CEO John Firth states “The ability of firms to embrace climate risks and opportunities, and factor them into strategic planning will not only improve their performance, but will create a more resilient banking sector and economy.”

Acclimatise is co-leading a United Nations Environment Programme – Finance Initiative (UNEP FI) project exploring climate-related risks and opportunities for financial institutions. The project has a Working Group of 16 leading international banks and will produce a harmonized methodology for banks that will help them strengthen their assessments and disclosure of climate-related risks and opportunities. A methodology providing guidance on physical climate risks and opportunities is currently being developed by Acclimatise and the banks and will be released in June.

Visit the TCFD Knowledge Hub: www.tcfdhub.org


Cover photo by Tobias Fischer on Unsplash
New methodology helps banking industry better manage and report low-carbon economy transition risks

New methodology helps banking industry better manage and report low-carbon economy transition risks

As part of a project exploring climate-related risks and opportunities for financial institutions, the United Nations Environment Programme – Finance Initiative (UNEP FI) has released a new methodology that will help banks improve the ways in which they manage the risk of transitioning into a low-carbon economy.

The methodology was developed with the support of Oliver Wyman and Mercer in close collaboration with a working group of sixteen leading banks. The group, which includes ANZ, BBVA, BNP Paribas, Barclays, Bradesco, Citi, DNB, Itaú Unibanco, National Australia Bank, Rabobank, Royal Bank of Canada, Santander, Standard Chartered, Société Générale, TD Bank Group, and UBS, is also piloting this methodology. It provides the first publicly available guidance specifically designed for banks to assess the risks and opportunities a low-carbon economy transition might pose to their lending portfolios.

This is the first of two methodologies to assist banks in responding to the final recommendations by the Financial Stability Board’s (FSB) Task Force on Climate-Related Financial Disclosures (TCFD). A further methodology, currently being developed by Acclimatise and the banks, will be released in June and provide guidance on physical climate risks and opportunities.

Download the methodology by clicking here.


Access the UN Environment press release by clicking here.

Access the publication on the UNEP FI website by clicking here.

Cover photo by Kai Gradert on Unsplash.