New resources and step-by-step approach help investors address direct and indirect physical risks and identify more climate resilient assets
TORONTO | Nov. 3, 2021 –– The Investor Leadership Network (ILN) launched today a new resource to help investors address direct and indirect physical risks associated with climate change. Created with the support of KPMG LLP, the Climate Change Physical Risk Toolkit will help asset owners and managers better understand and manage the potential impacts of climate change on their investments.
The frequency and severity of climate change-related weather events are increasing, posing systemic, macroeconomic risks to financial systems, as well as physical risks to assets and operations. In this new era of uncertainty, investors are searching for guidance on how to make better informed decisions.
“ILN members agree that the physical impacts of climate change introduce a complex set of risks that may have material impact on their investments, and recognized an industry-wide need for a more comprehensive guide to include these considerations as part of the overall investment risk analysis,” says Amy Hepburn, CEO of the Investor Leadership Network. “With KPMG, we’ve been able to provide investors with clear guidance and a one-stop shop of resources that will help them quickly understand and integrate physical risks into their investment decisions.”
To deliver this guidance, KPMG worked with ILN member organizations to identify the range of ways in which physical risks could adversely impact investments, and then created a toolkit that provides four practical resources:
- An investor perspective on the scientific and macroeconomic context for understanding physical climate change risks;
- A step-by-step scoping methodology to identify physical climate risks and opportunities, with an illustrative case study to demonstrate how the methodology can be applied;
- A Disclosure Guide with criteria to support an investor’s assessment of physical risk disclosures and metrics; and
- A Resource Guide of credible third party sources of information on climate risks and opportunities, accessible on the ILN website as a searchable, interactive database.
The Toolkit is a product of the ILN’s Climate Change Initiative and is the group’s third open-source resource created by investors, for investors, to address various aspects of incorporating climate change risks and opportunities into investment processes. The Toolkit complements recently published TCFD guidance on Metrics and Targets.
According to KPMG’s 2021 Global CEO Outlook, more than two-thirds (69 per cent) of CEOs worldwide say income inequality and climate change are a threat to their company’s long-term growth and value. And over a quarter (27 per cent) say they’re concerned that failing to meet climate change expectations will result in the public markets not investing in their business.
“This is a growing priority for businesses and investors alike to better understand the financial implications of the full spectrum of direct and indirect physical climate risks on a company and its broader value chain,” says Ms. Hepburn who shares her views as part of KPMG’s Voices for a Sustainable Future.
“Our goal with this toolkit is that it will ultimately help investor incorporate climate risk into their decision and identify more climate-resilient assets,” adds Ms. Hepburn.