CICERO - Center for International Climate Research
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KEY TAKE AWAYS FROM THE EVENT:

The preferred format for first step of climate risk assessment: red flags: Based on feedback in the workshop, financial actors were most interested in receiving a climate risk assessment as a first step in their analysis that flags at-risk investments. This red flag would trigger enhanced due diligence and was prioritized over other options such as numerical scores, raw data files or reference maps. Financial actors will need further support materials for the due diligence in the form of questionnaires, data, etc. It may also be useful to draw out steps to the red flag, and then lay out options for what they can do with flagged investments, i.e. incorporating climate risk assessment into decision making.

Stakeholder interests and needs are diverse: The exchange with financial institutions demonstrated that development mandates and commercial activities may have different implications for risk management. It may be useful to map out types of financial actors (municipal banks, REITs, ratings agencies, pension funds, commercial banks, private equity, etc.) and their motivations/needs and roadmaps for integration of climate risk information.

Engagement/buy-in is limited within financial actors. In some cases, general attitude towards ESG or climate may be uninformed or uninterested (ref. the « I’ll be gone » mentality). Several financial actors asked us how to engage the rest of an organization on these issues.

SMEs are a chokepoint for climate data: SMEs are not required to disclose information publicly and are often too small to conduct climate analysis internally. Requiring disclosure may impose undue burdens or costs on entities of this size, and banks requiring the disclosure risk alienating the businesses as clients. This lack of disclosure contributes to difficulty obtaining complete information for value chains. There is thus interest in further analysis on SMEs.

Scenarios and short-term physical impacts need to be explained more clearly. Financial actors are focused on transition risks and are perhaps unaware that we are locked into worsening physical climate impacts. Scenario analysis before 2050 is not as relevant for resilience planning. This can be explained better.

Christope Periard (Météo-France), Jana Sillmann (CICERO), Julien Sciau (AFD) and Marine de Bazelaire (HSBC) discussing physical climate risk analysis. Photo: CICERO

THE EVENT WAS ORGANISED BY:

 

ABOUT THE EVENT Financial actors are already exposed to the impacts of climate change on the real economy as illustrated by PG&E’s bankruptcy in early 2019. While financial institutions need to prepare for physical climate risks now, they face a lack of science-based information relevant for their decisions.

What are the needs of financial institutions to integrate physical climate risks in their decisions? What solutions are already emerging to fill these needs?

To answer these questions, the European ClimINVEST consortium will share the results of a 2-year collaboration between financial institutions and climate change specialists. The research institutions and partners in the financial sector will explain how they clarified their needs and present their solutions to help integrate physical climate risk in investors’ decisions.

This event is an opportunity for financial practitioners to learn science-based and pragmatic recommendations about what physical climate risk assessment should look like, what kind of scientific information can be used and why, but also pave the way forward.

We will be presenting preliminary results for active feedback from investors. We will have a first set of fact sheets, impact chains, sector materiality assessments and interactive maps ready for investors to provide input on.

Organized by Finance for Tomorrow and placed under the High Patronage of Paris City Hall, the "Paris for Tomorrow Week" is taking place from November 25 to 29, 2019. More than just a “Climate Week”, the week-long series of events explores issues related to both financing and achieving the climate objectives and the Sustainable Development Goals (SDgs). This whole week will gather in Paris the financial and business community as well as civil society, local and public authorities.

We are proud that our event A closer look: translating physical climate hazards into financial impacts  is taking place during this major annual Rendez-vous!