On Thursday, 10th of September, a new documentary was issued on S4C looking at the effects of the current COVID-19 pandemic on the environment. Hosted by Daf Wyn and Steffan Griffiths, the documentary interviewed experts in their field to gain insights into the nexus, including Professor Emeritus Huw Cathan Davies, an Atmospheric Physicist at the Institute for Atmosphere and Climate Science at ETH University, Zurich. Also interviewed was our very own Climate Risk Analyst, Erin Owain, who spoke about various green recovery packages presented by Governments in response to COVID-19. Additionally, Erin spoke about supply chain disruptions and the need to build resilient business models, in conjunction with tackling social and economic inequality in the context of climate justice.
The documentary is available with English subtitles until the 9th of October.
8 September 2020 – UN Environment Programme Finance Initiative (UNEP FI) has released a report on physical climate risks and opportunities from Phase II of its Task Force for Climate-related Financial Disclosures (TCFD) Banking Program with climate risk advisory and analytics firm, Acclimatise. The report, “Charting a New Climate”, provides a state-of-the-art blueprint to support financial institutions to navigate the changing physical climate risk landscape.
For banks, investors and financial institutions the COVID-19
pandemic has demonstrated the widespread consequences of systemic, global
risks. As such, the financial sector has continued to recognize the importance
of responding effectively to climate risks and seizing opportunities. More firms than ever
before are disclosing their climate risks and opportunities under the TCFD
framework. At the same time, regulators and investors are demanding greater
transparency on the way climate change will impact future business operations.
The TCFD Phase II banking pilot engaged thirty-nine global financial
institutions on six continents. The program empowered participants to identify,
assess, and manage their climate risks and opportunities. Participating banks
were led through a series of modules designed to expand their physical risk and
opportunities toolkits. Other climate experts were consulted throughout the
program including analytics providers and leading climate scientists.
Phase II of UNEP FI’s Banking Pilot began in 2019 and builds upon the outcomes and findings of Phase I. The Phase I Pilot involved 16 commercial banks and developed initial methodologies for undertaking forward-looking scenario-based assessments of climate risks and opportunities in loan portfolios, in line with the TCFD recommendations. For physical risks and opportunities, it culminated in the publication of “Navigating a New Climate” in 2018.
The new report, “Charting a New Climate”, provides financial institutions with a state-of-the-art blueprint for evaluating physical risks and opportunities. Complete with case studies from participating banks, the report investigates leading practices for five critical topics related to physical risks and opportunities:
Extreme events data and data portals – reviewed examples of climate and climate-related extreme events data and portals from both public (free to use) and commercial data providers.
Portfolio physical risk heatmapping – recognized the benefits of examining total portfolio exposure and identifying where higher physical risks may lie before moving on to ‘deep-dive’ assessments of at-risk portfolio segments.
Tools for physical risk assessment of financial
risk – aimed to improve banks’ understanding of commercially-available tools
and analytics, as well as training the Phase II banks to use the Phase I
Physical risk correlation analysis of finance
institution portfolios – was developed as banks recognized the value of having
a deeper understanding of observed relationships between loan performance
metrics and climate-related events.
Analysis of opportunities driven by physical
climate risk – aimed to provide insights into the climatic, business, policy
and market-led drivers of physical risk-related opportunities.
provides a useful framework for assessing and reporting on physical risks and
opportunities; “Charting a New Climate” gives firms an expanded toolbox with
which to approach this important work. Despite the tangible benefits to
participating institutions, the insights contained within the report are also
relevant for organisations across the finance sector. The toolkit developed in
Phase II provides a comprehensive way for organisations to consider their
physical risks and opportunities and move from assessment to action.
“Charting a New Climate” marks the beginning, not the end, of the journey for financial institutions looking to holistically consider physical impacts. Banks need to continue to improve the external and internal streams they rely on for climate data about their borrowers. Tool providers will increasingly need to consider the interaction effects of simultaneous hazards in a warming world and the complex cause-effect chains linking those hazards to investment performance. Governance and risk management functions will need to integrate climate into their existing policies. The banking sector has a major role to play in implementation of the Paris Agreement by mobilizing financial flows to deliver adaptation and climate resilience.
The Phase II pilot aimed to provide active
guidance to banks on some of the pressing challenges in assessing physical
risks and opportunities, focused on key methodological issues highlighted in
Phase I. It took as its starting point the ‘future directions’ identified in
the final chapter of the Phase I report, which identified key challenges and
proposed ways forward to begin to address them. It aimed to deepen and improve
upon the Phase I methodologies. This Phase II report therefore provides richer
technical guidance, and more information on resources available to assess
physical risks and opportunities than its Phase I forerunner.
Case Study from [Redacted]: Physical risk analytics are not homogenousbetween vendors even for listed companies, while there are particular
challenges in assessing physical risks for SMEs due to a lack of data on those
companies. Scenarios are not granular enough and not all the hazards are
integrated. Overall, there is still a lot of room for improvement in the
information area. Key areas of improvement we would wish to see from physical
risk analytical tools include greater flexibility, accuracy and easy management
of massive volumes of information (e.g. retail mortgages).
Previous correlation studies show that storm surges, wildfires, sea level
rise, inland flooding, drought, and other hazards are already impacting
financial portfolios. This is because globally significant climate models such
as El Niño and the Pacific Decadal Oscillation drive extreme weather, physical
risks, and related socio-economic impacts. By discovering opposing associations
(such as floods in one region coinciding with droughts in another) it may
eventually be possible for portfolio managers to hedge against such physical
Physical climate change impacts are often
considered as a risk management challenge. What is missing is a recognition of
the banking sector’s critical role in the implementation of the Paris Agreement
by mobilizing financial flows to deliver adaptation and resilience. It is
essential that banks assess and explore the opportunities to provide finance
within their markets and to their counterparties. The opportunities framework
has been designed to enable banks to explore how they can align their strategic
and operational activities with the Paris Agreement and play a major role in
the mobilization of private sector finance towards adaptation. This chapter
explores several key drivers which will influence the demand for finance from
counterparties as they respond the impacts of a changing climate.
Physical risk correlation analysis of FI
portfolios – was developed as banks recognized the value of having a deeper
understanding of observed relationships between loan performance metrics and
climate-related events. Some banks have reported that borrowers are already
being affected by climate and weather events, and these effects provide early
signals of a changing climate, and empirical evidence which may help to
calibrate forward-looking physical climate risk assessments. The module
provided a step-by-step process for banks to undertake correlation analysis
with a worked example using actual property values for an anonymized coastal
city and its neighborhoods in the US. The results revealed neighborhoods and
types of house experiencing ‘climate gentrification’ – a term used to describe
increases in real estate values in neighborhoods that are more resilient to
climate-related threats. The module also summarized recent developments in scientific
research on correlation analysis and more sophisticated statistical techniques,
based on a review of more than 50 studies investigating flood, drought and
wildfire risks within the real estate and agriculture sectors.
The Working Group
The Working Group includes the following thirty-nine banks:
ABN-AMRO, ABSA, Access Bank, Bank of Ireland, Barclays, BMO, Bradesco, Caixa
Bank, CIBC, CIMB, Citibanamex, Credit Suisse, Danske Bank, Deutsche Bank, DNB,
EBRD, FirstRand, ING, Intesa Sanpaolo, Itau, KBC, Lloyds, Mizuho, MUFG, NAB,
Nat West, Nedbank, NIB, Nomura, Nordea, Rabobank, Santander, Scotia Bank,
Shinhan, Standard Bank, Standard Chartered, TD Bank, TSKB and UBS to develop a
blueprint for assessing the climate-related physical risks and opportunities
for banks’ corporate credit portfolios.
Acclimatise is a specialist advisory and analytics company
providing world-class expertise in climate change adaptation and risk
management. Founded in 2004, their mission is to help clients understand and
adapt to climate risk and take advantage of the emerging opportunities that
climate change will bring. With offices in the UK, US, India and mainland
Europe, Acclimatise has worked in over 60 countries worldwide. Working with financial
institutions, national and local governments, multilateral organisations, and
major corporations, Acclimatise has been at the forefront of climate change
adaptation for over a decade.
UNEP FI is a partnership between UNEP and the global
financial sector to mobilize private sector finance for sustainable
development. UNEP FI works with more than 300 members – banks, insurers, and
investors – and over 100 supporting institutions – to help create a financial
sector that serves people and planet while delivering positive impacts. UNEP FI
aims to inspire, inform and enable financial institutions to improve people’s
quality of life without compromising that of future generations. By leveraging
the UN’s role, UNEP FI accelerates sustainable finance.
 While there are many portals providing data on projected future
incremental changes in temperature and precipitation, the Phase I pilot
identified a lack of data on future changes in extreme events.
At Acclimatise we actively encourage our talented staff to innovate and evolve their roles. With great personal support and opportunities to grow across every field of work we’re involved in. Acclimatise is a thriving, friendly and enjoyable place to be.
We believe that we all must do more to prepare for a climate that is very different from that of today. We’re a team of passionate people working to make a difference out of a deep sense of responsibility to help manage the climate crisis. We’ve done some great things already, but there’s so much more to come. Be a part of our story, and help make our company even more amazing.
Acclimatise’s mission is to make the world more resilient to climate change. We do this by making climate change information useful for our clients, helping them to make the very best decisions in the face of uncertainty. Working with corporates, financial institutions and governments around the world, Acclimatise is committed to achieving the greatest impact in driving action on climate change adaptation. Acclimatise has delivered specialist advisory and analytics services to over 180 clients in more than 80 countries worldwide.
Last week, the World Meteorological Organisation (WMO) announced that there was around a 20% chance that one of the next five years will be at least 1.5 degrees warmer than pre-industrial levels. The earth’s average temperature is already over 1 degree warmer than pre-industrial levels, and continues to rise as more greenhouse gas emissions are released into the atmosphere. The WMO forecast is significant as, in November 2016, countries signed the Paris Agreement, which included a commitment to keep warming “to well below 2°C and pursue efforts to limit it to 1.5°C”.
The WMO’s finding is especially concerning as last year they issued a similar forecast which estimated the chance of exceeding 1.5 degrees in five years to be just 10%. This suggests that the world is still failing to tackle climate change with sufficient urgency and casts further doubt on the possibility of hitting the 1.5-degree target. The clear implication of this is that we must prepare for a highly unstable climate in a world where average temperatures are well above the 1.5- and 2-degree temperature targets.
One swallow does not a summer make
So does the latest WMO forecast mean we’ll miss the Paris Agreement’s
1.5-degree target? Whilst still a cause for concern, even if one of the next
five years surpassed 1.5 degrees, we would not have breached the Paris
Agreement’s target, because this is calculated as a 30-year moving average.
It’s a bit like measuring your running speed. The qualify
time for the men’s marathon in the Tokyo Olympics is 2 hours, 11 minutes, and
30 seconds. That’s an average of about 5 minutes per mile. Just because you
managed to run a sub-5-minute mile on your morning run does not necessarily
mean that you are now ready to go for gold at the Olympics (no matter how much
Strava kudos your friends give you). It could have been a fast mile for a
number of reasons. Maybe it was downhill, the wind was behind you, or you were
only ever running one single mile full pelt before collapsing. To think you
could now run that 5-minute mile 25.219 more times, and keep that pace, might
seem a bit of a stretch. Instead, in order to establish your long-term trend, you
need to compare your averaged speed across a much longer distance, much closer
to a marathon length, in order to fairly judge your marathon potential. One mile
is not a fair judge.
The same is true here. Whilst there’s a 20% chance we might hit an annual average of 1.5 degrees warmer in the next 5 years, this is quite different to stating that we’ve crossed the threshold of the Paris Agreement, as this threshold is determined by a 30-year average. This is so that the effects of natural variability can be accounted for. For example, 2015 and 2016 were both affected by El Niño, which meant the underlying human-caused warming was amplified. Indeed, the WMO report says that there is only a small chance – 3% – that the next five-year average will exceed 1.5 degrees.
A worrying direction of travel
In 2020, the Arctic is likely to have warmed by more than
twice as much as the global mean. There are also still impacts of climate
change to be felt between now and 2024. In 2020, many parts of South America,
southern Africa, and Australia are likely to be dryer than the recent past.
Between now and 2024, high latitude regions and the Sahel are likely to be
wetter. Sea-level pressure anomalies suggest that the northern North Atlantic
region could have stronger westerly winds, resulting in western Europe
experiencing more storms.
A single year that is 1.5 degrees warmer than pre-industrial levels is not enough to surpass the 1.5-degree threshold as described by the Paris Agreement, but it is an indicator that it is within reach. There is still a lot of climate change to be experienced between now and the Paris Agreement target of 1.5 degrees of warming – more than enough to motivate us in ensuring we do not exceed it. However, it remains unlikely that collectively we will act fast enough to reduce our emissions meet the target. At the moment, we are on track for qualifying for a much warmer world, with an unstable climate unlike anything experienced in human history.
On 29th July at 10:00 EDT, Acclimatise CEO John Firth will be moderating an EO4SD-led panel discussion as part of the World Bank’s Innovate4Climate virtual conference. This will take stock of the use of Earth Observation (EO) data in climate resilience, and look to the future in regards to what development practitioners will find useful next in terms of EO products and services.
Introduce and encourage the use of earth observation (EO) products and services for the purposes of building climate resilience, particularly in a development setting
Catalyse the innovative deployment EO products and services across the project life cycle and across a range of decision-making contexts, from finance mobilisation to monitoring and evaluation
Enable our audience to learn about cost-effective EO climate data and platforms, and how these can be accessed and used.
Acclimatise has taken the decision to remove its company page from Facebook. It has come to our attention that Facebook has included a loop-hole in its fact-checking program that allows non-expert staff members to overrule the judgement of climate scientists and make climate disinformation ineligible for fact-checking by classifying it as ‘opinion’. This has undermined the credibility of Facebook’s partnership with Science Feedback, to allow trained climate scientists to evaluate the accuracy of viral content.
We believe that Facebook is facilitating the spread of misinformation about climate change, which directly undermines Acclimatise’s mission to make the world more resilient to climate change and its impacts. As a company driven by its values, Acclimatise has a responsibility to take action on issues that cause harm to our staff, our environment and the wider community.
Facebook’s continued failure to stop the spread of misinformation and hate speech on its platform is also of great concern to us. This inaction fuels racism, violence, and may undermine democracy and the integrity of elections around the world.
We are deeply concerned that the company has named Breitbart News a “trusted news source” and made The Daily Caller a “fact-checker” despite both publications having deplorable values. In view of the dangerous misinformation about climate change and the conflict with our own values, we have decided to sign up to the Stop Hate for Profit campaign.
Nine months after its launch, the IDB Invest-funded initiative to support Honduran banks identify climate resilient investments, concluded during a well-attended webinar. Organised by IDB Invest and AHIBA (Asociación Hondureña de Instituciones Bancarias) and facilitated by Acclimatise, the event provided an opportunity to go over the project’s methodology to identify resilient investments and to hear national technology providers’ perspectives on market trends for resilient technologies, their benefits and financing challenges. Further, IDB Invest and Bancolombia also reflected on their experience promoting sustainable finance across Latin America and its benefits. Overall, the ultimate objective was to promote a better understanding of the business opportunities arising from financing technologies and products that can increase climate resilience in at-high-risk sectors.
As 60 people, including over 30
representatives from the banking sector, tuned into the webinar to hear about
the initiative’s insights and lessons learnt, speakers went through the
following key elements:
Financing resilient solutions requires innovation in how investment opportunities are identified and framed
In order to determine how to
finance climate resilient solutions, banks should first analyse their
investment portfolio to see what sectors are the most relevant, which of them
are the most vulnerable to climate change and what climate change risks they
are facing. Grounded on this understanding of climate risks in their
portfolios, they can then identify those technologies, products and services
that could help avoid, minimise and manage those risks. They can also determine
what is the market potential for those technologies and carry assessments of
the business environment. This is all the more relevant in a country considered
one of the most vulnerable to climate change globally.
It is important also for banks to
understand that the mechanisms to finance resilient solutions differs from traditional
financing in that:
The purpose of the credits must be clear and
demonstrate climate resilience benefits;
The process for the selection of eligible
investments must be transparent and eligibility criteria on the resilience
benefits must be incorporated in the credit approval process;
Resources are administered to ensure
traceability of credits and portfolios dedicated to resilient investments
Monitoring and evaluation is undertaken to
ensure access to information on climate resilient credits and their achieved
Similarly, banks must be aware
that commercialising resilient products and how to incentivise and increase
credit demand also differs from traditional financing and the key role played
by technical assistance and strategic alliances with solution providers.
Financing resilient solutions is a business opportunity for banks in Honduras
The webinar has also helped to
demonstrate that there is already a market for a number of resilient solutions
in the country, driven by companies’ need to improve their competitiveness and
ensure their survival in the face of climate impacts. To make the case,
Acclimatise presented 11 resilient solutions that were identified and characterised
following the abovementioned approach, and reflected on the observed demand and
market potential and the return on investment profile of these investment
from Inelec, Frio Industrial and Durman,
which are local providers for some of the resilient solutions identified, took
the floor to introduce these technologies, including energy efficient air
conditioning, smart cooling solutions and solar irrigation. The providers
reflected on the ROI profile of each of these investments, noting a steady
increase in the market demand for their products and services; but
acknowledging that certain barriers still remain, in particular the high cost
of the initial investment and a lack of adequate financial products to support investment
in these technologies are obstacles still to be surpassed.
As noted by Sandra Rivera from PESIC (the Energy Efficiency Project in the Industrial and Commercial Sectors (PESIC), a concrete way to push resilient technologies forward is to build up strategic alliances between technology providers, business owners and engineers providing technical assistance and confirming the technologies’ resilience benefits, such as lower energy consumption. PESIC aims both to increase technical and institutional capacities in energy efficiency, and to develop financial instruments that favour investments in energy efficiency equipment and practices.
Another important avenue to
promote resilient investments is through the development of strategic alliances
between the banks and the different providers and distributors of climate
resilient solutions in Honduras. AHIBA, as the national association of commercial
banks in the country, has an important role to play in this, as it can support
the development of these alliances and the transfer and sharing of experiences promoting
resilient investments between the banks.
Practical experiences and lessons learnt in capturing “green” and “resilient” financing opportunities across Latin America
The event also featured reflections from IDB Invest, who
described the mechanisms put in place to promote sustainable finance on the region,
including green and sustainable bonds. In addition, the Colombia bank
Bancolombia share its experience in the development of credit lines to support
sustainable and climate resilience investments. Bancolombia highlighted the
importance that adhering to international protocols (such as the Equator
Principles and CDP) as well as national ones (i.e. the Green Protocol) and the
need to have buy in from the board of directors. Moreover, they noted that
having an Environmental and Social Risk Management system significantly facilitated the development of a green strategy,
as well as the development of a taxonomy to clearly define what constitutes a
green and a resilient investment, to provide banks with an operational
framework. Many banks indeed already finance climate resilience, but it is
likely they are not yet aware of it, given they lack a proper taxonomy and
system to track credits that build climate resilience.
Both presenters agreed on the
benefits of sustainable finance in general and climate resilient finance in
particular. These benefits include, among others, better access to long-term
financing in capital markets, improved value of customer franchise and response
to demands for socially responsible investments. When it comes to financing
climate resilience, this enables banks to avoid losses arising from climate
impacts and potential associated default payments on their loans, while also catering
to the financing needs of new market segments, and as such expanding their
In the time of COVID-19, the need to foster a green recovery has clearly emerged. This includes the importance of considering climate change resilience to ensure the new economy is built upon climate-proof foundations. Banks henceforth occupy a centre role in this endeavour, in Honduras and across the world.
toolkit has been released to support country efforts to engage the private
sector in the National Adaptation Plan (NAP) processes. The toolkit, released
by the NAP Global Network, is aimed at national governments and other
practitioners who are engaged in developing and implementing NAPs. Featuring
examples of best-practice from around the world, and a wide range of tools
including several developed by Acclimatise, the toolkit acts as a guide to
encourage the appropriate support of the private sector in facilitating
The toolkit also includes links to resources that help governments to integrate climate change into decision-making processes such as the Caribbean Climate Online Risk and Adaptation tooL – CCORAL – an online support system for climate resilient decision making, developed by Acclimatise for the Caribbean Community Climate Change Centre (CCCCC).
The NAP Global Network and the UNFCCC Adaptation Committee are hosting an interactive webinar about the toolkit this Wednesday 24th June 2020. Learn more and sign up below.
which business should be engaged in your climate change adaptation planning
processes: the smallholder farmer or the big banker? Or when should you engage
them: in the planning or implementation stage of the National Adaptation Plan
In this interactive webinar, your decisions will guide the story!
advisors will ask for your input at five important junctures of a case study.
The majority votes made by participants will impact the direction of the
story, as you collectively play the role of a government worker responsible for
the NAP process in a sunny and totally made-up island nation.
worry, we have a just the right guiding document to help with your decisions! This
webinar is all about demonstrating the applicability of our new toolkitdesigned
to help governments develop strategies to effectively engage private sector
actors in their country’s NAP process:
Key nations have announced US$ 4.8 million in funding for the delivery of early warning systems and services to reduce loss of life from severe weather events in the Pacific region. The announcement was made 10 June 2020 during the 11th Steering Committee Meeting of the Climate Risk & Early Warning Systems (CREWS) initiative by its Member States, the governments of Australia, Canada, France, Germany, Luxembourg, Netherlands, Switzerland and the United Kingdom.
The CREWS initiative was established in 2015 at the United Nations Climate Change Conference (COP21) as a financial mechanism to save lives and livelihoods through the expansion of early warning systems and services in Least Developed Countries and Small Island Developing States. Its three Implementing Partners are the World Meteorological Organization, the World Bank Group / Global Facility for Disaster Reduction and Recovery and the United Nations Office for Disaster Risk Reduction.
Filipe Lucio of WMO indicated at the meeting that the funds would allow the island countries in the region to detect, monitor and forecast severe high-impact weather events. Additional services to be developed include access to longer-term seasonal predictions and operational early warning and response plans that ensure the most vulnerable people in the communities receive warnings.
CREWS Member States also approved the allocation of funds to support countries to monitor the effectiveness of their national early warning systems. Additionally, the preparations of another US$ 4 million project, covering the South West Indian Ocean that includes the countries of Comoros, Madagascar, Mauritius, Mozambique and Seychelles was initiated for funding in the near future.
To date, the CREWS Trust Fund has delivered over US$ 43 million in project funding and mobilized an additional US$ 270 million from public funds of other development partners – realizing accelerated life-saving action and maximized finance effectiveness.
In 2019, CREWS support was scaled up to 44 least developed countries and small island developing states. Through this work, more than 10 million people in some of the world’s most vulnerable communities now have access to better early warning services.
In Afghanistan, 3D printers are being used to build automatic weather stations, bringing early warning services to rural communities.
In Burkina Faso, more than 1,100 rural farmers received 130 weather forecasts in 2019, broadcast via local radio stations.
In Fiji, nearly one million people now have advance flash flood warnings, creating increased security and saving lives.
In Niger, more than 600 women were trained in early warning services and have now created women-led WhatsApp groups to amplify advance warnings throughout their communities.
Across the Caribbean, national emergency management offices, national hydromet offices, national gender bureaux, sectorial ministries, and non-governmental groups including women organizations are now working together to bridge the gender divide in access to early warning systems.
A major European Commission-funded project known as PLACARD,
called last month for governments to focus on building climate resilience as
part of their COVID-19 recovery plans.
In a policy brief, issued in the final weeks of the project, the Platform for Climate Adaptation and Risk Reduction (PLACARD) project said that climate change adaptation and disaster risk reduction are vital in order to manage future systemic risks to European societies and economies. The brief had three central recommendations:
Building more resilient societies, including advancing
the European Green Deal, should be a central concern as Europe considers its
recovery from the coronavirus pandemic. The COVID-19 recovery must be
climate-compatible and focus on building long-term resilience, in addition to
responding to short-term priorities.
Climate change adaptation and disaster risk reduction
are important processes for managing future risks and galvanising cooperation
between communities, across sectors and scales and beyond borders. Insights
from these areas should be leveraged for the European Green Deal and COVID-19
Improving communication, harmonising language,
connecting actors, and building structures for cooperation will be essential
for a resilient European Green Deal and green COVID-19 recovery. A wealth of
tools and approaches are available to take immediate steps. Continued
investments are needed to strengthen existing institutions and create new ones
to manage risk and promote cooperation in a warming world.
PLACARD was a research programme that brought together
leading practitioners in climate resilience and disaster risk reduction to
improve response to climate-related shocks and stresses faced by European