Physical Risk & Resilience Working Group

We support investors to understand physical risk, build resilience into portfolio management, and drive investment into climate adaptation solutions.

Even if global warming is limited at 1.5C, there will still be significant physical damage caused by the effects of climate change.

Immediate and decisive action is needed to both mitigate and adapt to its impacts, particularly for countries like Australia and New Zealand, which face unique vulnerabilities due to their geographic and climatic conditions.

Chair

Kate Simmonds
Physical Risk Advisor, IGCC

2023 Working Group Objectives

Build Capability

of members to understand, assess, and manage physical climate risks in investment portfolios.

Produce Research

to support management of physical risk and increase resilience.

Integrate Physical Risk

into members’ existing climate-related activities (e.g., disclosure, engagement, policy and advocacy).

Physical Risk Initiatives

The physical risk working group provides guidance on both national and international initiatives to guide the integration of physical risk into investment decisions.

Climate Measurement Standards Initiatives (CMSI)

CMSI is a framework designed to improve the credibility and comparability of physical climate risk scenario analysis in Australia’s financial sector.

It provides financial and scientific guidance on key methodological decisions, as well as providing an update on the most recent climate science.

Physical Climate Risk Assessment Methodology (PCRAM)

PCRAM provides a comprehensive methodology for investors looking to integrate and price resilience in investment processes.

Designed by the Coalition for Climate Resilient Investment (CCRI), a United Nations Climate Action Summit (UNCAS) and COP26 flagship initiative, it uses engineering, climate, and financial data to guide decision making.

APRA Vulnerability Assessment

In November 2022, the Australian Prudential Regulatory Authority (APRA) published an information paper on the results of their Climate Vulnerability Assessment (CVA), a first step towards robust climate risk assessments the broader financial sector.

It identified limited understanding of indirect and systemic risks, and the need for transparency and comparability in climate risk assessments. The report also highlighted certain regions as more vulnerable with potentially significant impacts of both physical and transition risks.

We produced a briefing note for institutional investors as they prepare for assessing their own exposure to physical and transition risks due to mandatory climate disclosure.

Resources and News

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Investor Briefing Note: APRA Vulnerability Assessment

15 February 2023

Banks Climate Risk Assessments: Not The Full Picture

30 November 2022

The State of Net Zero Investment in Australia

7 March 2023

Physical Risk and Resilience Strategy for Institutional Investors

The Investor Group on Climate Change is currently in the process of developing a company-wide strategy for physical risk with three primary objectives:

Credibly assessing climate change’s direct and systemic physical risks

Providing information on the physical risks of climate change that is clear, accurate, easily accessible and decision-useful.

Implementing equitable policy to build resilience and help communities adapt

Ensuring governments plan resilience and adaptation measures to the systemic physical risks in an equitable and investable manner.

Aligning capital flows to adaptation and resilience goals

Enabling investors to have the policy certainty they need to deploy capital towards effective adaptation and resilience measures.