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Cambridge Institute for Sustainability Leadership

13 January 2022 – The University of Cambridge Institute for Sustainability Leadership’s (CISL) ClimateWise leads paper on integrating climate-related risk assessment.

Click here to download the report.

About

A systemic approach to understanding and addressing sustainability is critical to the financial sector tackling the complex network of interconnected issues. Despite growing awareness of the interrelation of challenges that face people, nature and climate, we must recognise that integrated assessments of sustainability issues remain at an infant stage. To address this will require significant attention in the coming years to bring disparate areas of research together in the same dance.

ClimateWise has long focused on climate-related risk assessment research. In this report produced with the UNEP FI TCFD programme, we step further toward the required systemic approach by exploring the combined financial impact of physical and transition risks. The report has developed theoretical principles and practical steps for implementation of an integrated assessment of physical and transition risks with examples of sectoral analysis. The research builds on the existing methodology and tools from the ClimateWise and the wider market, as well as workshops and interviews with financial practitioners.  

Principles for integrated assessment of physical and transition risk

  1. Approach: Conduct transition and physical risk analysis simultaneously
  2. Level of analysis: Be sector-specific as well as location-specific
  3. Quantification: Capture climate risk impacts via forward-looking metrics
  4. Scenario-based analysis: Take into account feedback loops between physical and transition risk
  5. Relevance: Align to TCFD pillars

Citing this report

University of Cambridge Institute for Sustainability Leadership (CISL). (2022). Climate Tango: Principles for integrating physical and transition climate-risk assessment with sectoral examples. Cambridge, UK: University of Cambridge Institute for Sustainability Leadership.


Find out more about CISL's Centre for Sustainable Finance and ClimateWise.

Please sign up and watch the report launch webinar on 3 Feb 2022 here.

Published: January 2022

Authors and acknowledgements

The research design and authors of the report are Dr Bronwyn Claire, Meng-Lian Li and Dr Bojun Wang from CISL, with support at CISL by Dr Nina Seega and Nick Villiers and at United Nations Environment Programme Finance Initiative (UNEP FI) by David Carlin and Maheen Arshad.

UNEP FI’s Task Force on Climate-Related Financial Disclosures (TCFD) Phase III Banking Pilot was set up, managed and co-ordinated by Remco Fischer and David Carlin from UNEP FI. The pilot project was led by a working group of 47 banks and investors convened by UNEP FI.

Disclaimer

The opinions expressed here are those of the authors and do not represent an official position of CISL, the University of Cambridge, or any of its individual business partners or clients.