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.