Sustainability Community

Good morning Community!

I recently met someone who worked for insurance companies creating contracts for asset manager clients and companies working in agriculture, infrastructure, etc. That person shared interesting insights on insurance companies' vision on how they calculate the risk and the probability of certain events (floods, droughts, fires) and based on that how they make decision whether some project or portfolio is "no risk" "insurable" or "uninsurable".

Insurance companies are also helping asset managers and other investors to hedge the physical climate risks. And even though reporting on physical climate risks (as I understood) is not yet compulsory for investors, many already do. That person (who hopefully will join our community soon) recommended that those investors wishing to assess their portfolio and start assessing physical climate risk focus on /understand the following 3 things:

1. Where are the potential problems in their portfolio 
2. What kind of potential risk is there (flood, drought, fire, increased temperature, rising sea levels etc)
3. Prioritization and urgency (where to start from)

I got interested in this theme as several members mentioned that to me too. So here's what i found out:

• In 2021 alone, weather and climate-related events cost USD 329 billion (45% highter than the 21st century average). Report from Aon, 2023
• In the "business as usual emissions scenario, the value of assets facing climate risk could be as high as USD 24.2 trillion
• According to S&P Global 80% of the world's largest companies are reporting exposure to physical or market transition risks associated with climate change
• Here's a good overview article of all the physical climate risk reporting requirements that describes different frameworks (TCFD, CDP, ISSP etc)
• lastly, attaching here also report from ClimINVEST on common methodologies of assessing climate physical risks for financial decision makers. It has interesting case studies (climate exposure assesment on an agircultural portfolio, heat distribution, multi-sector corporate portfolio and on a real estate portfolio)

Encouraging members to commment on these findings, as it is purely from public open sources. It would be great if those who are doing or were involved in this type of assessmens share their practical experience or questions.

------------------------------
Aya Pariy
------------------------------

Attachment(s)

ClimINVEST_AssessingPhysicalClimateRisks_Carbone4-2020.pdf   1.70 MB 1 version

20230125-weather-climate-catastrophe-insight.pdf   11.47 MB 1 version