Physically Fit? How financial institutions can better disclose climate-related physical risks in line with the recommendations of the TCFD

This report concentrates on physical risk disclosure practices by financial institutions and provides a resource for them to develop such disclosures. Climate-related risk disclosures by financial institutions tend to focus more on transition risks, resulting in a possible physical risks “blind spot.

The review of publicly available disclosures shows that the identification, measurement, and disclosure of climate-related physical risks by financial institutions are currently incomplete and inadequate for stakeholders to assess the extent of physical risks facing these institutions and their clients. No financial institution in the sample had responded in full to all of the TCFD-recommended disclosures for physical risks. Financial institutions should improve key principles for disclosures, particularly around comparability, reliability, and objectivity. This should be supported by policy makers and regulators through better methods, data, more detailed definitions of supervisory expectations, and by a level playing field in implementation.