EBRD, GCECA publish recommendations on physical climate impacts in financial reporting

By Svitlana Pyrkalo

• New report on physical climate risk provides recommendations for firms to integrate climate impacts into investment decisions
• Paper, published at EBRD and GCECA-organised conference, summarises guidance on emerging practices developed by working groups
• Leading financial institutions, corporations and regulators discuss steps to improve financial stability in the face of climate risk, in line with G20-initiated TCFD

A report, “Advancing TCFD guidance on physical climate risks and opportunities”, is released today at a conference hosted at the Bank’s headquarters in London.

The report presents recommendations on disclosing physical climate risks and opportunities in financial reporting. These recommendations are based on analysis conducted by industry-led working groups, which have been convened by the EBRD since 2017.

Highlights of the recommendations include:

• Firms should perform forward-looking risk assessments and disclose material exposure to climate hazards such as flood risk, water stress, extreme heat, storms, and sea level rise.
• Firms should also investigate benefits from investing in resilience and opportunities to provide new products and services in response to market shifts.
• Firms should use scenario analysis and incorporate long-term climate uncertainties into business planning and strategic decisions.

The working groups included representatives from AFD, Allianz, APG, Aon, Bank of England, Barclays, BlackRock, Bloomberg, BNP Paribas, Citi, Danone, DNB, DWS, The Lightsmith Group, Lloyds, Maersk, Meridiam Infrastructure, Moody’s, the OECD, S&P Global, Shell, Siemens, Standard Chartered, USS and Zurich Asset Management. An expert team led by Acclimatise and Four Twenty Seven served as the secretariat to the working groups throughout the course of the meetings.

The report is available on a dedicated website www.physicalclimaterisk.com, as are opinion pieces from heads of working groups and other leading experts.

The report, and the conference, respond to calls for strengthening financial stability in the face of climate change uncertainties, through the disclosure of climate-related market information.  This was the core message, delivered last summer, of the Task Force on Climate-Related Financial Disclosures (TCFD), initiated by the Financial Stability Board (FSB) in response to a call from the G20 economies.

The conference provides a venue to discuss the development of metrics for disclosing physical climate risk and opportunities and the integration of these disclosures into decision-making. Panellists at the event represent a variety of market leaders and regulators, including the Bank of England, the French Treasury and the European Commission.

This spring, the EBRD also became the first multilateral development back to support the TCFD.

Since 2006 the EBRD has committed over €26 billion in projects under its Green Economy Transition approach. The Bank is a leading financier in a number of areas, including energy efficiency, renewable energy and climate resilience financing.