skip to content

Cambridge Institute for Sustainability Leadership (CISL)

22 February 2019 – The ClimateWise Physical Risk Framework demonstrates how the expertise and tools of the insurance industry can support other parts of the financial system to understand their physical risk exposure.

Download the report

Physical Risk FrameworkPhysical risks– such as rising temperatures, flooding, drought, sea level rise and water scarcity - are already being felt globally, and the associated financial losses (both insured and uninsured) have significantly increased in recent years.

The ClimateWise Insurance Advisory Council has developed the ClimateWise Physical Risk Framework, which demonstrates how the risk analysis tools of the insurance industry can inform other parts of the financial sector and demonstrate the role of adaptation in mitigating these risks. The framework offers real estate investors and lenders a means of understanding the potential physical risks of climate change on their portfolios.

Physical risk exposure is likely to vary geographically both within and between portfolios but the impacts are significant across the board. For example, a 4°C warming scenario could see average annual losses caused by floods to UK mortgages more than double. While insurance will play an important role in managing the impact of climate change, the increase in risk could, in the most severe cases, make premiums unaffordable.

The analysis carried out for this report uses ETH Zurich’s CLIMADA model and The Future Flood Explorer developed by Sayers and Partners.


ClimateWise is a global network of leading insurers, reinsurers, brokers and industry service providers who share a commitment to reduce the impact of climate change on the insurance industry and society. It is a voluntary initiative driven directly by its members and facilitated by the University of Cambridge Institute for Sustainability Leadership (CISL).

Citing this report

Please refer to this report as: Cambridge Institute for Sustainability Leadership (CISL). (2019, February). Physical risk framework: Understanding the impacts of climate change on real estate lending and investment portfolios. Cambridge, UK: Cambridge Institute for Sustainability Leadership.

Author and acknowledgements

The study design and editorial process was led by Dr Bronwyn Claire, Andrew Voysey, Rachel Austin, Emma Jillings, Dr Tom Herbstein, Amy Nicholass and with input from Adele Williams and James Cole of CISL. The authors of this report were Mark Westcott, John Ward and Swenja Surminski (Vivid Economics) and Paul Sayers (Sayers and Partners LLP), with expert input provided by David Bresch (ETH Zurich). The authors are grateful for the guidance of the ClimateWise Insurance Advisory Council and for the advice and feedback received from members of the Advisory Panel which was established for this project. With special thanks to The Lighthill Risk Network for their support.


Copyright © 2019 University of Cambridge Institute for Sustainability Leadership (CISL). Some rights reserved


The views expressed in this report are those of the authors and do not represent an official position of CISL, ClimateWise or any of its individual business partners or clients.


Published: February 2019