Carbone 4 Introduces Climate Risk Impact Screening (CRIS)

Carbone 4 introduces Climate Risk Impact Screening (CRIS), a method for analyzing the physical risks of climate change for financial institutions.

The development of the CRIS method was made possible thanks to support from AFD, Caisse des Dépôts, FRR, Natixis and Mirova, CCR, CDG Capital, ERAFP, EDF, and BNP Paribas. This development was supported by a high-level scientific advisory board. The year 2017 was marked by an increase in extreme weather events, such as Hurricanes Harvey, Irma, and Maria, as well as exceptional droughts in Europe, California, and Canada, and a deadly monsoon in Asia. This climate change is destabilizing economic activities and leading to growing risks of financial instability. Consequently, the regulatory environment is becoming more demanding, in line with the conclusions of the TCFD and Article 173. The CRIS methodology is designed to address the emerging demand for information on the potential impacts of climate change on financial assets. CRIS aims to provide, at both the issuer and portfolio levels, physical risk indices based on 7 direct climate hazards and 9 indirect climate hazards, 60 sectoral vulnerability profiles, and 210 sovereign vulnerability profiles.

The method applies to multi-asset investment portfolios (equities, corporate bonds, infrastructure, and sovereign bonds). One year after beginning development of the method, Carbone 4 is now able to present its initial results. Under a scenario of average warming of 4°C by the end of the century, and taking into account the seven climate hazards identified by the CRIS method, the countries most at risk account for 11% of the global economy. Located primarily in Asia, the Pacific, and the Indian Ocean, these countries are exposed to and vulnerable to the intensification of flood risks, sea-level rise, and storms. On the corporate side, based on an initial sample of 308 companies, 19% of multinational companies are assessed as being at high risk. The most exposed sectors are manufacturing (production of consumer goods, particularly electronics), utilities (electricity and water), chemicals, agri-food, and transportation (airports and ports in particular) due to numerous vulnerabilities in their value chains (exposed production assets, reliance on vulnerable supply chains, etc.).

The location of their production activities is a key differentiating factor. A methodological guide has been published on www.crisforfinance.com. With the launch of CRIS, Carbone 4 and all of its sponsors aim to help the financial sector make progress on these critical issues. Carbone 4 is also launching a new product called CRIS, which provides detailed analyses for a wide range of financial assets. With the CRIS service—which will be available in an operational version by the end of 2017—and Carbon Impact Analytics, which focuses on transition risks, Carbone 4 now offers the first comprehensive climate risk analysis solution for investors. According to Alain Grandjean and Jean-Marc Jancovici, founding partners of Carbone 4, “With CRIS, we are taking a new step forward in the financial sector’s operational integration of climate risks, enabling it to fully comply with Article 173.”

Press Contact

Dorothée Coloby Phone: +33 (0)1 76 21 10 00 dorothee.coloby@carbone4.com

About Carbone 4

Founded by Alain Grandjean and Jean-Marc Jancovici, Carbone 4 is a consulting firm specializing in energy and climate transition that offers its expertise to public and private sector organizations.