The EBRD's new report on physical risks aligns with our C.R.I.S. approach

Article written by Clément Ory, Senior Consultant at Carbone 4

The EBRD1 complements the work of the TCFD2 by providing new recommendations on physical risks.

Almost a year ago, the TCFD published a report containing a series of recommendations aimed at structuring climate reporting by companies and financial institutions, better assessing the risks and opportunities associated with climate change, and examining business resilience through the use of forward-looking scenarios. While this report marked a significant turning point in corporate climate reporting and investor dialogue, it focused more on transition risks than on physical risks. The EBRD and GCECA3 have therefore decided to launch an initiative titled “Advancing TCFD Guidance on Physical Climate Risks and Opportunities” after the summer of 2017, with the goals of building on the TCFD’s work on physical risks and proposing a more precise and in-depth conceptual framework. This initiative—which brings together financial institutions, credit rating agencies, and companies—has resulted in following the publication on May 31, 2018, of a guide titled"Advancing TCFD Guidance on Physical Climate Risks and Opportunities". Carbone 4 commends the work of the EBRD and the GCECA, which serves as a reminder of the importance of incorporating physical risks into a company’s climate strategy. The report also serves as an excellent toolkit for companies seeking to incorporate physical risks into their climate strategy. For these reasons, Carbone 4 endorses the recommendations set forth in this report.

C.R.I.S., a methodology for physical risks aligned with the recommendations of the EBRD and the GCECA

Among the 18 recommendations included in this report, several may be more or less easy to implement within companies, such as the need to:

• Describe the past impacts related to climate-related hazards (i.e., Recommendations Nos. 4 and 5)
• Describe the process for managing physical risks (i.e., Recommendation No. 7)).

Implementing other recommendations, however, may prove to be a challenging task, particularly in terms of the resources that need to be allocated and the technical expertise that must be mobilized. Carbone 4 can help you meet certain recommendations by leveraging its methodology Climate Risk Impact Screening (C.R.I.S.) and, more broadly, our various services related to adaptation. Below is an example of recommendations from the EBRD report for which the Climate Risk Impact Screening method could provide you with key insights.

[1] European Bank for Reconstruction and Development [2] Task Force on Climate-related Financial Disclosures [3] Global Center of Excellence on Climate Adaptation For more information, please feel free to contact us at: adaptation@carbone4.com.