A group of UK investors, regulators and scientists has published a suite of new research to help financial markets integrate climate adaptation and scenario analysis into their decision-making.
The Climate Financial Risk Forum (CFRF), set up by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority in 2019, has just launched six reports.
In one, the group presents nine case studies from the likes of Aviva, Aberdeen Investments and Legal & General, exploring different approaches to quantifying the financial impacts of climate scenarios.
The case studies are intended to “provide useful takeaways for financial professionals looking to perform climate scenario analysis on their portfolios,” explained CFRF in a statement.
“Comparing and contrasting each case study’s approach and results can assist financial professionals in their effort to quantify the financial risks of climate change, manage them, and meet regulatory expectations.”
The paper, which covers various asset classes and risk types, will enable investors to benchmark themselves against peers, develop new use cases and methods, and support risk-based internal discussions, it added.
CFRF also unveiled an interactive tool that generates a summary of investors’ climate-related risks and opportunities, based on their business activities and products.
The 2025 Online Climate Scenario Narrative Tool is based on data from scenarios developed by the Central Banks’ and Supervisors’ Network for Greening the Financial System.
Adaptation and resilience
Another of the six reports was produced by a working group including Zurich Insurance, Impax Asset Management, Schroders and Columbia Threadneedle.
It claims to “provide a comprehensive framework for advancing the integration of climate adaptation into financial decision-making”, based on the use of high-quality data and physical risk analysis.
The report addresses how adaptation and resilience should be considered in climate transition plans, credit assessments – including for sovereign issuers – and financial products.
Other members of the group include the UK’s Environment Agency, the Met Office, the Bank of England, the FCA, and the Institutional Investor Group on Climate Change.
CFRF also published recommendations on how to provide training and awareness in the financial markets about the physical risks posed by climate change.
Its adaptation working group has committed to further enhancing its guidance for investors, and to make future recommendations to policymakers to “catalyse increased flows of adaptation and resilience finance”.
Nature
Finally, in the latest in a stream of recent developments on nature and biodiversity in finance, CFRF’s Nature-related Risk Working Group released its second handbook on the topic.
It provides guidance for investors and other financial institutions on how to improve their understanding, assessment and management of nature-related risks, in addition to their ongoing work on climate.
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