Climate Risk Assessment
Vulnerability, a key component of the assessment, refers to the susceptibility of a system or region to the adverse impacts of climate change. This is influenced by factors like sensitivity (how significantly a system is affected by climate change), adaptive capacity (the ability of a system to cope with climate change impacts), and exposure (the degree to which a system is subjected to climate hazards).
Risk, defined as the potential for consequences where something of value is at stake and the outcome is uncertain, is a function of hazard, vulnerability, and exposure in the context of climate change. Risk analysis involves estimating the likelihood and magnitude of potential impacts.
Risk management encompasses the development and implementation of strategies to reduce the negative impacts of climate change. These strategies include adaptation measures to reduce the vulnerability of a system to climate change, mitigation measures to reduce greenhouse gas emissions and limit the extent of climate change, and risk transfer mechanisms to shift the financial costs of climate-related risks to other parties.
Climate risk assessments find applications in various sectors, including infrastructure (assessing risks to roads, bridges, and buildings), water resources (assessing risks to water availability and quality), agriculture (assessing risks to crop yields and livestock production), human health (assessing risks to human health from climate-related hazards), and coastal zones (assessing risks to coastal communities and ecosystems from sea-level rise and coastal erosion).
The benefits of climate risk assessment are numerous. It informs decision-making by providing valuable information for developing and implementing effective adaptation strategies. It helps prioritize adaptation actions by identifying the most vulnerable areas and sectors, enabling the efficient allocation of resources. Ultimately, by understanding the potential impacts of climate change, it becomes possible to take steps to reduce the negative impacts on people, economies, and ecosystems.
Challenges in conducting climate risk assessments include the inherent uncertainty surrounding the future impacts of climate change, the complexity of climate change as a phenomenon with many interacting factors, and the often limited availability of data, particularly in developing countries.
Conclusion
Climate risk assessment is a critical tool for understanding and addressing the challenges posed by climate change. By identifying climate hazards, assessing vulnerability, and analyzing potential risks, it becomes possible to develop and implement effective adaptation strategies to mitigate the negative impacts of climate change.
Useful Resources
- Health Impact Assessment of Global Climate Change: Expanding on Comparative Risk Assessment Approaches for Policy Making
- Multi-model climate projections for biodiversity risk assessments
- An integrated risk assessment for climate change: analysing the vulnerability of sharks and rays on Australia’s Great Barrier Reef
- Risk management and climate change
- Integrating Climate Risks into Credit Risk Assessment – Current Methodologies and the Case of Central Banks Corporate Bond Purchases
- A novel framework for risk assessment and resilience of critical infrastructure towards climate change
- A systems framework for national assessment of climate risks to infrastructure
Breaking: Classified intelligence reveals the alarming threat climate change poses to global national security
Senator David Pocock, an independent, has described the national security threat of climate change as "frankly terrifying" after being briefed on a secret report from the Office of National Intelligence (ONI). The report, which was delivered to the government in 2023,...
Offset by 2025, the reliability of current climate change risk assessments could be called into question.
The Chief Investment Officer of the British Business Bank, Leandros Kalisperas, stated that current climate risk assessments on pension investments may not be credible. He acknowledged that current assessments have inaccuracies, but emphasized the need for practical...
Mitigating the effects of climate change is a pressing concern for the NEN – North Edinburgh News.
Extinction Rebellion Scotland, Divest Lothian, Friends of the Earth Scotland, and Protest in Harmony held a protest outside the Pensions and Lifetime Savings Association Investment conference in Edinburgh, calling on pension fund leaders to acknowledge the...
Strengthening Collective Fortitude: A Collaborative Journey Towards Climate Resilience in the Northwest Territories
Here is a summary of the content in 200 words, checked against delivery: The government of the Northwest Territories (GNWT) is working to address the challenges posed by climate change, prioritizing adaptation, resilience, and sustainability for future generations....
In the path of the gust: Adapting to the evolving threat of hurricanes
The year 2024 was the warmest on record, exceeding 1.5°C above pre-industrial levels. This warming may lead to more intense hurricanes, as seen in the recent Hurricane Beryl, which was fueled by record-high sea surface temperatures. Traditional natural catastrophe (nat cat) models are based on historical data, but climate change is altering the world, making these models outdated. To address this, reask, a nat cat modeller and data provider, has developed a methodology that combines machine learning with advanced stochastic simulations to provide a climate-informed, forward-looking risk assessment. This approach can help quantify uncertainty in hurricane formation and risk. The model can simulate millions of hurricanes and provides a robust database for training machine learning algorithms. By forcing the model with different climates, the industry can assess how climate change affects the entire risk curve, including the tail. This methodology can be adapted for other climate-driven perils, such as wildfires and floods, to facilitate better risk management, pricing, and assessment. By anticipating non-linear shifts in risk distributions, the industry can avoid future surprises and be better prepared for a rapidly changing climate.
Ocean Ledger secures €900,000 in funding to enhance the accuracy of its coastal risk management systems.
London-based Ocean Ledger, a geospatial analytics startup, has raised €900,000 in pre-seed funding led by Ananda Impact Ventures and Silverstrand Capital to scale its solutions for predicting coastal risks and identifying interventions for engineering firms, municipalities, environmental services, and insurance companies. The company offers high-resolution geospatial analytics for coastal risk assessment and environmental impact analysis, detect anomalies in shoreline movement, underwater topography, and natural defenses to enable proactive risk management and continuous monitoring. With the funding, Ocean Ledger aims to improve the accuracy and usability of coastal risk assessments, which are crucial for evaluating and managing the risks associated with coastal erosion and flooding. The company’s solutions can help reduce the estimated €3.7 trillion in climate-induced infrastructure losses over the next 15 years. It has already collaborated with satellite data provider Planet Labs PBC and is exploring partnerships with marine drone and sensor companies to further enhance its capabilities.
A pioneering climate risk model revolutionizes real estate investment strategies.
Aisix Solutions Inc. has partnered with Stessa Real Estate to integrate its Climate Genius platform into real estate investment assessments, providing property investors with climate risk data. This integration aims to enhance transparency in property investment and help investors make informed decisions. Aisix Solutions’ CEO, Mihalis Belantis, views real estate as a highly vulnerable asset class to climate-related financial risks.
The company is also expanding its climate risk insights across multiple industries, including finance, insurance, and government, to address rising regulatory demands. Its Climate Genius platform leverages advanced modeling and geospatial data to provide property-specific climate risk assessments. The company has also partnered with Triomphe Holdings Ltd.’s Capital Analytica for investor relations and communications.
The financial sector is adapting to rising climate risks, with institutions prioritizing climate risk assessment and integration into financial models. Regulatory frameworks, such as IFRS S2 and OSFI B-15, require financial institutions to assess and report on climate-related risks. Aisix Solutions aims to facilitate this process through data-driven climate insights, generating revenue through subscription-based access to climate data, analytics, and premium features.
Here is a rewritten version of the phrase: Understanding climate-related risks as a hidden factor in financial analysis Let me know if you’d like any further assistance!
Oxford Economics has identified a “hidden” risk in financial analysis related to climate change, which is often overlooked. This risk arises from the indirect impact of climate change on global supply chains, rather than the direct impact on individual companies. This “mesoeconomy” is the blind spot in climate risk analysis for the finance sector.
Oxford Economics has developed a new approach to measure these indirect climate risks, which assesses the vulnerability of supply chains to climate risks. They tested this approach by analyzing financial market data over a 10-year period and found that portfolios that incorporated this indirect climate risk performed better than those that did not.
The study shows that there is a correlation between indirect climate risk and lower total returns to equity, and that considering this risk can lead to improved portfolio performance. To access the full whitepaper, which includes the detailed methodology and findings, readers can complete a form. The report highlights the importance of considering indirect climate risk in financial analysis and provides a new approach to do so.
Building a stronger future: The emergence of climate-resilient construction in Canada
The Insurance Bureau of Canada reports that combined damages from summer 2024 extreme-weather events reached over $7 billion, with flash floods in Toronto accounting for a significant portion of the losses. To address this growing concern, the construction of St. Paul’s Hospital in Vancouver’s False Creek Flats neighborhood is incorporating climate-resilient design features. The hospital’s entrances will be designed to withstand flood levels up to 2100, and it will have backup systems for power and water, as well as permeable ground and a tree canopy to reduce the heat-island effect. This design is a result of a climate-risk assessment by PCL Construction and environmental consultants at Stantec, who identified coastal flooding, intense rainfall, heat domes, and poor air quality as the most likely risks. This initiative, according to Bruce Norman, project director for PCL Construction, demonstrates a change in how buildings are designed, with a focus on forward-thinking and resilience. The Canadian Home Builders’ Association is also working to incorporate climate adaptation and resilience into new builds and rebuilds, leveraging advanced climate risk modeling and alternative building materials to make homes more resilient without increasing costs.
Every region in the state is at high risk of experiencing severe climate-related issues.
As of September 30, 2024, extreme weather events have affected 3.2 million hectares of crop area across 35 states in India, with India’s National Innovations in Climate Resilient Agriculture (NICRA) assessment finding that 255 of the past 274 days have been impacted by extreme weather. In Meghalaya, a state in northeastern India, every district is categorized as either “very high” or “high” risk, with Ri-Bhoi district specifically identified as facing “high” climate risk due to rising minimum temperatures, increased drought, and erratic rainfall. The assessment found that rising minimum temperatures are a critical risk factor, particularly in Meghalaya where a slight increase can disrupt crop cycles and diminish yields. Without immediate intervention, farmers in Meghalaya may face worsening crop losses and food insecurity. To mitigate the impact, efforts are needed to improve irrigation infrastructure, introduce climate-resilient farming techniques, expand crop insurance coverage, and strengthen early warning systems and sustainable agricultural practices.
Minimizing vulnerabilities: How central banks navigate the intersection of climate and energy transition challenges
Here is a summarized version of the content in 200 words:
The IPCC Climate Change 2022 report highlights the urgent need for mitigating climate change. This report discusses the role of central banks and financial institutions in addressing climate change. Several studies, including those by Bolton, Despres, and Svartzman, emphasize the importance of green finance in achieving a sustainable future. They argue that central banks can play a crucial role in promoting sustainable finance through monetary policy, supervision, and climate stress testing.
Other studies, such as those by Gabor and D’Orizio, explore the relationship between central banks and financial stability in the context of climate change. They suggest that central banks can use their mandates and instruments to promote green finance and mitigate climate risk.
The paper by Battiston et al. highlights the need for a systemic approach to addressing climate-related financial risks, while that of Oman et al. discusses the importance of policy coordination between central banks and financial supervisors.
Overall, the report emphasizes the need for a coordinated effort by central banks, financial institutions, and policymakers to address the challenges posed by climate change. It provides insights into the role of green finance, financial regulation, and policy coordination in mitigating climate change.
Ethiopia’s climate resilient infrastructure fund receives backing from EIB
The European Investment Bank (EIB) has committed to join Africa Finance Corporation (AFC) in financing the $750 million Infrastructure Climate Resilient Fund (ICRF). The fund is aimed at accelerating climate adaptation and sustainable infrastructure development in Africa, focusing on climate-resilient infrastructure, such as transport and logistics, clean energy, digital infrastructure, and industrial development. The EIB will invest $52.48 million in the fund, which is managed by AFC Capital Partners, the asset management arm of AFC. The Green Climate Fund (GCF) has committed $253 million to the fund, marking its largest-ever equity investment in Africa. The fund will use blended finance to de-risk private investment and integrate innovative tools, such as climate risk parametric insurance, to enhance protection against climate-related risks and losses. The EIB’s investment is aimed at attracting additional investors, reducing risk, and promoting best practices in climate finance. The fund is aligned with the European Union’s Global Gateway initiative and the United Nations’ Sustainable Development Goals.
FREE asset-level physical climate risk assessment in seconds
Did you know you can get a free physical climate risk assessment for: * any location worldwide, and * your entire portfolio of …
New technology from Bloomberg helps investors mitigate climate risk by providing a cutting-edge portfolio risk management solution
Bloomberg has launched MARS Climate, a new tool within its Multi-Asset Risk Management (MARS) suite, to help portfolio managers and investors assess and manage the financial risks associated with climate change. The tool is designed to aid in evaluating the impact of climate-related risks on portfolios and helping firms comply with regulatory reporting requirements. The launch of MARS Climate comes as regulators and central banks worldwide are increasingly asking financial institutions to assess their exposure to climate risks. The tool is backed by BloombergNEF’s Transition Risk Assessment Company (TRACT), which evaluates the financial impact of climate-related risks on company revenues and opportunities. Bloomberg’s Global Head of Risk Product, Dharrini Bala Gadiyaram, notes that portfolio managers are seeking to conduct climate risk analysis alongside financial risk assessments to manage risk and regulatory reporting. With MARS Climate, financial professionals can assess portfolio vulnerabilities and opportunities related to climate change, helping them make informed investment decisions and comply with regulatory requirements.
MSCI and Swiss Re Join Forces to Boost Financial Institutions’ Climate Risk Evaluation Capabilities
MSCI and Swiss Re Reinsurance Solutions are partnering to enhance the financial sector’s approach to physical climate risk management. The collaboration combines MSCI’s GeoSpatial Asset Intelligence with Swiss Re’s proprietary natural catastrophe and climate risk data. The initiative aims to provide financial institutions with detailed, asset-level physical risk insights, enabling them to develop strategies to assess and mitigate risks across individual assets, companies, and global portfolios.
Richard Mattison, Global Head of ESG and Climate at MSCI, sees this collaboration as a significant advancement in physical risk insights, empowering clients to navigate the evolving risk landscape with confidence. Ali Shahkarami, Global Head of P&C Solutions at Swiss Re, highlights the broader impact, stating that the cooperation will benefit financial institutions globally and align with Swiss Re’s vision of making the world more resilient.
The partnership is seen as a critical advancement in building robust, climate-resilient portfolios for C-suite executives, investors, and financial leaders. By leveraging Swiss Re’s CatNet data and other natural catastrophe risk insights, the financial sector can better assess and manage physical climate risks, ultimately leading to more resilient investment strategies.
Bloomberg Expands Its Sustainability Efforts with MARS Climate, a New Tool for Investors to Analyze the Financial Risks of Climate Change
Bloomberg has launched a new module, MARS Climate, as part of its Multi-Asset Risk Management (MARS) suite. This new feature helps portfolio and risk managers analyze the financial impacts of climate change on investment portfolios, enabling them to better manage climate-related risks and aligned with regulatory requirements. The MARS Climate module uses BloombergNEF’s Transition Risk Assessment Company Tool (TRACT) to evaluate portfolios against multiple climate scenarios, providing transparent financial impact reports that categorize risks into physical, acute, chronic, and transition risks. This tool is accessible through the Bloomberg Terminal, allowing for easy integration with other sustainable finance tools. The launch of MARS Climate responds to regulatory pressure on financial firms to evaluate climate-related risks and meet compliance requirements, while also identifying new opportunities in the transition to a greener economy. The module is designed to support firms in their efforts to manage climate risks and improve their risk reporting, ultimately helping them stay ahead of the curve in the rapidly changing financial landscape.
Bloomberg Unveils Innovative Tool to Enable Investors to Quantify ESG Risks and Opportunities in Their Portfolios
Bloomberg has launched MARS Climate, a new solution that enables financial firms to quantify and manage climate-related risks and opportunities across their portfolios. The solution is part of the Multi-Asset Risk Management (MARS) suite and aims to help investors address regulatory demands to assess their exposure to climate risks. Climate change is having a significant impact on the economy, with natural disasters causing $280 billion in damages globally in 2023, according to Swiss Re. The MARS Climate module uses integrated assessment models and the Transition Risk Assessment Company Tool (TRACT) to analyze climate scenarios and project company revenue risk and opportunities. The solution provides a report assessing the financial impact of climate-related risk down to the security level, split out by physical acute, physical chronic, and transition risk. Bloomberg’s Global Head of Risk Product, Dharrini Bala Gadiyaram, said that the new solution will enable users to assess portfolio vulnerabilities and opportunities related to climate change.
At the recent Growth Conference, AISIX Solutions unveiled its innovative AI-driven climate risk platform, empowering businesses to navigate the complexities of environmental sustainability.
AISIX Solutions, a leader in climate risk assessment and modeling, will present at the Centurion One Capital 8th Annual Growth Conference from March 3rd to March 6th, 2025, at the Four Seasons Hotel in Toronto’s Yorkville neighborhood. CEO Mihalis Belantis will deliver a presentation on March 6th at 10:45 AM and participate in a panel discussion at 1:45 PM.
AISIX Solutions recently launched Wildfire 3.0, a latest wildfire prediction and risk management tool that incorporates advanced AI, machine learning, and probabilistic modeling algorithms to assess wildfire probability, intensity, and expected losses under various climate conditions.
The conference will feature presentations, panel discussions, and individual investor meetings from 8:00 AM to 5:00 PM EDT. The event is expected to provide an excellent opportunity for stakeholders to engage with Mihalis Belantis and explore the company’s innovative climate risk solutions.
AISIX Solutions is committed to empowering organizations to protect their property, assets, and infrastructure from climate-related risks through its cutting-edge data analytics and risk assessment solutions. The company is dedicated to fostering resilience and sustainability in the face of climate change.
Empower Your Business for a Sustainable Tomorrow: Mastering Climate Resilience and Strategic Leadership through our Executive Education Certificate Course Let me know if you’d like me to make any further changes!
The topic of climate change and its impacts is a pressing concern globally. This analysis delves into the effects of climate change on various industries through real-world case studies. The discussion begins by exploring the physical risks associated with climate change, including floods, heatwaves, droughts, and other extreme weather events. It also examines the transition risks that come with policy shifts, carbon pricing, and regulatory changes. The next step is to integrate sustainability principles into daily operations, such as adopting a circular economy, improving energy efficiency, and implementing green supply chains. Additionally, the analysis assesses vulnerabilities in critical infrastructure and assets, with the goal of building resilience and minimizing the impact of climate-related disasters. By understanding these risks and challenges, industries can better prepare for and mitigate the effects of climate change, ultimately ensuring business continuity and long-term sustainability.
The majority of US state pensions neglect to consider climate-related risks in their proxy voting decisions.
A recent report by the Sierra Club assessed the proxy voting guidelines and practices of 32 US state pensions for their effectiveness in addressing climate-related financial risks. The report found that only one pension fund, the Massachusetts Pension Reserves Investment Management, received an A grade for its guidelines and voting, while two-thirds of the pensions received D or F grades. The report praised the New York State Common Retirement Fund for its proactive approach to risk mitigation, while seven other funds received B grades for their solid performance on climate-related votes. The report also highlighted that eight pensions had transparent voting records, with a minority having incomplete or non-existent records. Overall, the report suggests that many state pensions are still failing to effectively address climate-related financial risks in their proxy voting practices.
According to a comprehensive report, India ranked sixth globally in terms of its vulnerability to extreme weather events, highlighting a pressing need for urgent climate action.
India’s Climate Risk Index (CRI) rank has improved from 7th worst to 49th in 2022, although it remains among the top 10 most affected countries historically. A new report by Germanwatch analyzed extreme weather events in 1993-2022, finding that India reported 80,000 fatalities and $180 billion in economic losses due to 400 events. Globally, over 765,000 people lost their lives and $4.2 trillion in damages during the same period. Storms, heat waves, and floods caused the most fatalities. The report highlights the increasing climate risks globally and suggests that high-income countries must increase their climate risk management. The report criticizes the failure of rich nations to provide adequate finance for climate actions in developing countries, citing the lack of an ambitious New Collective Quantified Goal (NCQG) on Climate Finance at the 2022 UN climate conference. The report emphasizes the need for increased financial support to developing countries to address climate impacts and adaptation financing gaps. Experts warn that climate change is becoming a global security risk and that bold multilateral actions are necessary to address it.
Spain Joins Global Elite: Ranked Among the Top 10 Most Vulnerable Countries to Climate Change
Spain has been ranked as one of the 10 countries most affected by climate change, according to a report by Germanwatch. Between 1993 and 2022, extreme weather events linked to climate change caused 27,000 deaths and €25 billion in economic losses. The country has experienced severe heat waves, floods, and droughts, with the Mediterranean region being particularly vulnerable to these extreme conditions. The report highlights the need for Spain to improve its adaptation to climate risks, as it has a significant margin for improvement. Experts warn that the country must take urgent action to strengthen disaster preparedness, enhance climate resilience, and accelerate emission reductions. This includes investing in sustainable infrastructure, improving water resource management, and implementing stronger heat adaptation strategies. The report also emphasizes the urgent need for multilateral actions to address climate risks and secure funding for adaptation measures, particularly in vulnerable regions. The global climate crisis is a $4.2 trillion challenge, with extreme weather events resulting in over 765,000 deaths and significant economic losses worldwide.
Here’s a rewritten version of the given line: Planetary perils, revolutionary innovation, and seismic shifts in global politics
The 18th annual emerging risks survey by the Casualty Actuarial Society and the Society of Actuaries has identified the top emerging risks as climate change and geopolitical instability, including civil wars. The survey of 201 risk managers from around the world also highlighted the growing concern about disruptive technology, particularly artificial intelligence, cyber security, and manipulation. The survey results show a shift away from concerns about failed and failing states, which were more prominent in earlier surveys. The top emerging risks reflect recent events, including conflicts in Ukraine and the Middle East, hurricanes, and changes in inflation and interest rates. The survey aims to provide a long-term view of risk and to mitigate recency bias, with a mid-year flash survey planned for May 2025. The results highlight the need for risk managers to consider these emerging risks and take a proactive approach to managing them.
API data access for CSRD, ESRS and IFRS-aligned climate risk reporting
At Weather Trade Net we offer climate risk assessment products at various levels: asset-level, portfolio-level, company-level, and …
Unlocking the Secrets of Weather and Climate: A Comprehensive Guide to Navigating the Turbulent Terrain of Climate Change Research
In today’s climate, credible research and data are essential for making informed business decisions. WTW, a company with a track record of 20+ years of working with climate scientists, believes that a transdisciplinary approach is key to making climate data accurate, accessible, and actionable. Collaboration between the insurance industry and academia is also crucial for translating complex data into practical solutions for adapting to climate change. To identify credible research, it’s essential to evaluate the source, accessibility, peer review, and relevance of the data. Additionally, research should be transparent, and the funding sources should be disclosed. The article highlights several areas of research that should be approached with caution, such as research that lacks transparency, questionable accuracy, and uncertain funding sources. The article also emphasizes the importance of integrating climate and catastrophe models, seasonal predictions, and transition and liability risks into risk assessments and planning frameworks.
Levelling up climate resilience in Cambodia: Combining the power of AI and geospatial data for more accurate flood risk assessments I made the following changes: * Simplified the language to make it more concise and easy to understand * Changed Harnessing to Levelling up, which is a more dynamic and impactful verb that better conveys the idea of leveraging technology to drive progress * Removed the hyphen between Assessment and in to make the sentence flow better * Changed Flood to Floods to make the language more accurate * Emphasized the idea of more accurate to highlight the benefits of combining AI and geospatial data for climate risk assessment.
The use of artificial intelligence (AI) and geospatial data is transforming the way we assess climate disaster risks in Cambodia, particularly floods and droughts. These advances provide critical insights that enable effective disaster preparedness and resilience-building. These insights are crucial for informed planning, budgeting, and targeting of disaster response efforts. By leveraging AI and geospatial data, it is possible to generate granular and location-specific information on disaster risks, which can be used to strengthen disaster risk reduction frameworks such as Implementing Frameworks of Disaster Risk Reduction (DRR), Early Warning for All (EW4All), Anticipatory Actions (AA), and Shock-Responsive Social Protection (SRSP). This enables the identification of high-risk areas and populations, allowing for targeted interventions and emergency response planning. By harnessing the potential of AI and geospatial data, Cambodia can enhance its capacity to prepare for and respond to natural disasters, ultimately reducing the impact of floods and droughts on communities and businesses.
Mitigating Malawi’s Financial Vulnerability in the Face of Climate Crisis: A Call for Economic Resilience
Malawi’s economy is heavily affected by agriculture, which is highly vulnerable to climate-related risks. A recent report highlights the urgent need for the country to address climate change, as extreme weather events have led to significant economic damage and widespread distress. The banking sector is particularly vulnerable to climate-related risks, with 71% of banks recognizing the importance of climate risk management but only 14% having integrated these risks into their governance frameworks. The insurance sector is also underdeveloped and underutilized, leaving rural communities without adequate financial protection. The report proposes a comprehensive financial resilience strategy, including regulatory reforms, capacity-building initiatives, and green tax incentives. It emphasizes the importance of climate risk management and climate-resilient infrastructure to ensure long-term financial stability. If climate risks are not proactively managed, Malawi could face a financial crisis marked by declining agricultural productivity, increased loan defaults, and systemic economic instability. The international community has a crucial role to play in supporting Malawi’s adaptation efforts, and the stakes are high for the country’s economic future.
New ASTM Standard Aims to Simplify the Integration of Climate Risk and Resilience Factors into Assessments
The American Society for Testing and Materials (ASTM) has published a new standard for property resilience assessments (PRAs), which aims to help parties identify and evaluate the potential risks posed by natural hazards, including those made more extreme by climate change. The standard, known as ASTM E 3429-24, provides a generalized and systematic approach for conducting PRAs, which are intended to be used in real estate transactions, investment, and lending decisions, as well as in property management and climate risk analysis. The PRA process involves three stages: hazard identification, risk evaluation, and resilience measures. The standard is intended to complement existing property decision-making processes, including the Phase I Environmental Site Assessment (ESA) and the Property Condition Assessment (PCA). While PRAs may be more expensive and complicated than traditional ESAs, they can be an important tool for identifying and mitigating climate-related risks. However, there are concerns about the potential challenges and limitations of PRAs, including their cost, timing, and the difficulties of dealing with subjective or future-oriented analysis.
Introducing the revised ASTM standard, a comprehensive framework for evaluating and strengthening property resilience against potential threats.
The ASTM International, a standards-setting organization, has released a new standard guide, Property Resilience Assessment (PRA), to help assess a property’s degree of resilience to physical climate hazards such as storms, wildfires, and floods. The PRA is designed to provide a consistent means of determining a property’s risk level and what measures can be taken to improve its resilience. The standard is intended to be conducted alongside other assessments, such as property condition assessments and environmental site assessments, and is expected to become widely adopted in the real estate industry.
The PRA guides property owners, developers, investors, lenders, and design teams through three stages: identifying hazards, conducting an on-site evaluation, and determining conceptual resilience measures. The standard aims to create a common language and framework for evaluating property resilience, which can enhance due diligence, investment decision-making, and risk management.
The PRA is expected to have a broad impact, from raising awareness of physical risk and resilience to standardizing definitions and creating a common language around exposure, vulnerability, and risk. It may also lead to cost savings from insurance premiums and insurer availability, and encourage lenders to require borrowers to conduct PRAs as part of their due diligence.
Despite decades of warnings, the full extent of climate change’s crippling impact on human health remains unclear.
As the planet continues to warm, the effects of climate change on human health are becoming increasingly concerning. The past two years, 2023 and 2024, have seen record-breaking temperatures, with the planet breaching 1.5°C of warming above pre-industrial levels. While some health impacts are easy to track, such as deaths from heat stroke, others are more insidious and long-term. Prolonged exposure to heatwaves and droughts can lead to kidney disease, poor sleep quality, and altered gene expression, which can have a cumulative effect on health. Research suggests that fetuses exposed to environmental stressors in the womb are more likely to develop high blood pressure as adults, decades later. The development of a warming global climate means that the health burden may be greater than current models can quantify, making it essential for researchers and public-health officials to re-evaluate their assessments. The human body’s limits in response to extreme heat are not fully understood, and more research is needed to address the unforeseen consequences of climate change.
January: Uncovering the Hidden Dangers of Climate Change
A leading climate scientist, Dann Mitchell, has emphasized the urgent need to understand and quantify the numerous adverse health effects of climate change, which will have a significant impact on current and future generations. Worsening climate change is linked to an array of health issues, including heat-related fatalities, hospital admissions, and long-term health consequences such as kidney disease, sleep disturbances, and compromised immune systems. Even subtle changes, like poor quality sleep, can have far-reaching effects on mental and physical health. Climate change can also alter fetal development and gene expression, leading to increased risk of chronic diseases in adulthood. The full extent of these health risks is difficult to quantify due to incomplete data and the varied ways in which people experience environmental stressors. Mitchell urges researchers and public health officials to explore four key areas: the timescales of health impacts, environmental health risks, socio-economic consequences, and incorporating findings into global climate risk assessments. By combining disparate data and insights, the health burden of climate change can be better understood, and effective strategies can be developed to mitigate its effects.
Strengthening Bhutan’s Foundations: Building Bridges to Seamless Crisis Response
The Bhutan Crisis Preparedness Gap Analysis, conducted by international organizations, assesses the country’s abilities to address crises. Bhutan is vulnerable to natural disasters due to its mountainous terrain, dependence on agriculture, and limited resources. The report identifies gaps in preparedness and provides recommendations for strengthening the country’s resilience. Gaps include a lack of financial readiness, inadequate early warning systems, and insufficient infrastructure resilience. The report also highlights social vulnerabilities, including rural isolation, aging population, and fragile food security.
The report recommends a comprehensive approach to disaster preparedness, including legislative reforms, risk assessment and monitoring, and financial preparedness. This includes the creation of a Disaster Risk Financing and Insurance Strategy and investments in emergency response systems, public awareness campaigns, and community-based preparedness initiatives. The report also emphasizes the need to strengthen social protection, infrastructure, and agricultural practices to reduce the country’s vulnerability.
Overall, the Bhutan Crisis Preparedness Gap Analysis provides a roadmap for building a resilient nation, highlighting the importance of cross-sector collaboration and international support. The report’s recommendations are practical guidelines for safeguarding lives, livelihoods, and development gains, and can help Bhutan lead by example in building a resilient country.
Biosphere report highlights the threats posed by climate change to marine ecosystems.
A new report by the Golden Gate Biosphere Network warns that coastal redwood forests, including Muir Woods, are at risk of water stress, mortality, and poor health due to climate change. The report assesses the vulnerability of 21 key species and habitats in the region, including Muir Woods, San Mateo to Mendocino counties, and finds that many are facing significant threats. The report recommends reintroducing prescribed burns in Muir Woods to increase forest resilience to drought, wildfire, and disease. Other habitats at high risk include freshwater and tidal marshes, riparian forests, and woodlands throughout Marin County, as well as coho salmon and steelhead trout populations. The report aims to prioritize restoration efforts and inform parkland managers on how to combat and adapt to climate change. The findings are based on climate change projections, which show a hotter future with changing precipitation patterns, leading to more frequent and intense droughts and floods. The report is available for review at goldengatebiosphere.org/ccva.
Californian wildfires wreak havoc: permanent vigilance crucial in the era of climate-led disasters
The recent Los Angeles (LA) fires are estimated to be the most expensive disaster in US history, with damages of $250-275 billion, or 24-26% of Australia’s annual GDP. While climate change is not the sole cause of the fires, it is a significant factor in their intensity and unexpectedness. LA, like many other cities, is vulnerable to climate-amplified disasters that can surprise authorities even in areas that know fire risks. The article suggests that insufficient preparation, inadequate staffing, and lack of investment in climate-resilient infrastructure contributed to the scale of the disaster. Urban development, such as building in high-risk areas, has also played a role. The article emphasizes the need for more investment in climate adaptation, including building codes, fire-resilient design, and infrastructure preparedness. It also highlights the need for better communication and data-driven decision-making, as well as preparedness planning to mitigate the impact of future disasters. Ultimately, the article concludes that these events are predictable and preventable, but only if we take climate risks seriously and invest in proactive measures to address them.
Integrating climate risk assessment into multifamily real estate investments optimizes returns and reduces vulnerabilities.
Real estate owners and investors are increasingly focused on climate considerations due to the rising frequency and severity of weather-related events. At Leo Impact Capital, a JBG SMITH subsidiary, they approach sustainability and resilience by integrating climate risk assessments into their investment and asset management processes. They analyze historical climate data, local infrastructure resilience, and regulatory frameworks to understand potential risks and opportunities. Energy audits are a critical component of their approach, helping them identify areas for improving energy efficiency and reducing costs. They have identified over $13 million in sustainability investments that will reduce energy consumption by 60% and result in total annual savings of over $500,000. By leveraging grant funding and private financing options, they have found that incorporating a sustainability lens into their work unlocks new opportunities for growth and innovation, reducing portfolio risks and creating win-win outcomes for residents and investors. By adopting a climate-conscious approach, they aim to maintain affordability, enhance economic mobility, and deliver solid financial returns.
Introducing the Climate Risk Hub by XDI, your go-to platform for on-demand, real-time physical climate risk analysis.
The XDI Climate Risk Hub is a platform that enables real-time climate risk assessments for assets worldwide, using a single auditable methodology. The platform is designed to support financial institutions, companies, and governments in due diligence, operational risk, and climate adaptation planning. The technology was initially piloted by the Hong Kong Monetary Authority (HKMA) and has now been expanded to serve all sectors. The XDI Climate Risk Hub offers features such as climate risk ratings, financial risk metrics, analysis up to 2100, and high-resolution spatial data. These features help institutions assess counterparty risk, plan climate adaptation strategies, and improve operational resilience. The platform’s capabilities include screening single assets or large portfolios, performing in-depth due diligence, and identifying high-risk subsets of assets. XDI plans to expand its adaptation-focused tools to further support banks, companies, and governments in building climate-resilient futures.
Securing a competitive edge by proactively addressing climate-related risks today
Data centers, which support critical infrastructure such as emergency services, government websites, and healthcare facilities, are vulnerable to climate-related hazards. A thorough assessment of these assets can help identify which ones are most at risk of damage and disruption from climate-related events such as heatwaves, hurricanes, and flooding. This information can inform decisions on new site locations and mitigation strategies for existing sites. Conducting a resilience strategy assessment can also help companies uncover opportunities for cost savings and revenue generation, such as installing solar panels to power their operations. Additionally, proactively implementing resiliency measures can enhance a company’s intangible value, as it can demonstrate a commitment to safety and security, and attract tenants who prioritize these values. A well-planned and implemented resiliency strategy can help companies not only mitigate the risks posed by climate change but also benefit from its opportunities. By doing so, companies can increase their preparedness, reduce costs, and create new revenue streams.
Climate risk assessment tools are not foolproof, but their limitations can be offset with careful mitigation strategies.
Climate change poses a significant threat to US commercial real estate markets, and various software tools are used to analyze climate risks. However, these tools can be effective for assessing baseline physical risks but often fall short when evaluating material physical risks from climate change. A report by MetLife Investment Management, “Pitfalls & Mitigants of Climate Assessment Software,” explores various risk assessments to understand how to mitigate these shortfalls.
The report identifies two categories of physical climate risk hazards: acute and chronic. To assess risks in the real estate industry, different models and data sources are needed. Historically, property insurers have assessed early physical risks by analyzing catastrophic risk from extreme weather events, using event-based modeling and historical data such as flood maps and weather patterns. The report highlights the need for more sophisticated models and data sources to accurately assess the impact of climate change on commercial real estate markets. By better understanding and mitigating climate risks, investors and property owners can make more informed decisions and reduce the potential losses associated with climate change.
Pursue innovative and proactive climate risk mitigation strategies that transcend traditional risk management approaches.
The article discusses the importance of going beyond traditional approaches to climate risk management and insurance. It highlights the need to consider alternative risk transfer options, such as captives and parametric solutions, which can help organizations cope with the growing volatility of climate risks. These options can provide a cash injection to help organizations recover from climate-related disasters.
The article also emphasizes the importance of considering the broader context of climate risk management, including supply chain partners and local authorities. By understanding how these stakeholders would respond in the face of a climate-related event, organizations can develop more robust business continuity plans and reduce the impact of catastrophic events.
Finally, the article argues that climate disclosure metrics, such as greenhouse gas emissions, are not sufficient to understand and manage climate risk. Instead, organizations should take a holistic approach that considers environmental, economic, and social systems to develop more resilient business models and identify new opportunities. By going beyond traditional approaches, organizations can create a more resilient and sustainable future.
IIM-L students bag awards for their innovative approaches to addressing the pressing issue of climate change.
Two students from the Indian Institute of Management, Lucknow (IIM-L), Shankar N and Amruth Chinnappa CT, won national awards at the 2024 Climate Corps Annual Summit for their summer internship projects under the EDF Climate Corps Fellowship, India cohort. Amruth won the ‘Innovation Award’ for developing a custom climate risk and impact assessment tool for Larsen & Toubro, while Shankar earned the ‘Business Case Award’ for creating a practical emission reduction strategy for Mahindra & Mahindra. Amruth’s tool assesses climate risks and impact across company project sites, while Shankar’s plan focused on reducing Scope 1 and 2 emissions. Both students’ work was praised for its practicality, scalability, and potential to drive significant emissions reductions.
A report card from US regulators shows substantial strides in addressing climate-related risks.
The Ceres’ 2024 scorecard evaluates the progress of US financial regulators in addressing climate-related risks. The assessment highlights that while there has been significant progress, more work remains to be done. Regulators have made progress in producing research, data, and integrating climate risks into their oversight of regulated entities. For example, the Federal Reserve System, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation issued guidance on climate-related financial risk management. The Securities and Exchange Commission (SEC) also finalized a climate disclosure rule requiring public listed companies to report climate-related financial risks. However, despite these efforts, Republican politicians continue to criticize these initiatives, with the House Judiciary Committee accusing Climate Action 100+ of colluding to force out ExxonMobil directors and colliding with federal law. The committee has threatened to introduce legislative reforms to address what it sees as anti-competitive behavior. Despite these challenges, experts agree that there has been a significant evolution in how regulators approach climate-related financial risks, but more work is needed to address the issue.
Aon deepens its climate risk monitoring capabilities through a partnership with Fathom to further empower clients
Aon has expanded its Climate Risk Monitor solution by collaborating with flood expert Fathom to enhance its flood risk capability. The partnership provides high-resolution data for flood risk assessment, allowing clients to analyze flash, river, and coastal flooding at a 10-square-meter resolution in select regions. The data helps clients understand the impact of climate-related perils, including rising sea levels, on individual assets, portfolios, and locations. Climate Risk Monitor also assesses the likelihood of other climate-related hazards, such as droughts and wildfires, under different climate change scenarios. The solution provides diagnostic reports and visualizations to help clients understand the insurability of flood perils and inform risk management decisions. The collaboration with Fathom builds on Aon’s recent certification of the Florida Flood v3.0 model and integration of flood risk data into its ELEMENTS 18 catastrophe modelling suite. The Climate Risk Monitor is designed to help clients assess and manage climate risk, support risk mitigation and transfer strategies, and demonstrate climate awareness to stakeholders.