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Principle 2: MANAGE climate risks

Be active in understanding and managing climate risk. Assess your portfolio, pipeline and new investments. Work with clients to determine appropriate measures for building resilience to climate impacts and improving the long-term sustainability of investments.

The growing threats from climate change make understanding, quantifying and actively managing business exposure to the physical impacts of climate change and sudden or dramatic decreases in the value of carbon assets an important part of modern-day risk management.

Principle 2 emphasizes the importance of understanding and addressing climate change risks to an institution’s existing portfolio and operations, as well as pipeline and future investments.

 

Implementing Principle 2 may include the following actions:

  • Assessing and managing exposure to climate-related financial risks
    • Assessing the climate-related transition risks of assets and transactions
    • Assessing the physical climate risks of assets and transactions
    • Assessing the climate-related liability risks of assets and transactions
    • Integrating results of risk analysis into risk management processes

Additional resources

Report

Scenario analysis of transition risk in finance – towards strategic integration of deep uncertainty

Report

Final report on bridging data gaps

Report

Capturing risk differentials from climate-related risks: A Progress Report

Report

Climate tango: principles for integrating physical and transition climate risk assessment with sectoral examples

Training materials

Mini-MOOC “Financial Climate Risk”

Report

TCFD Knowledge Hub

Case study

Risk Reduction by a Regional Development Bank through Rapid Climate Risk and Vulnerability Assessments (Rapid-CRVA); FONPLATA’s recent experience

Report

Liability risk and adaptation finance

Report

The Climate Risk Landscape

Report

Assessing Physical Risks from Climate Change: Do Companies and Financial Organizations Have Sufficient Guidance?

Report

A guide to building climate-financial scenarios

Report

Addressing challenges of physical climate risk analysis in financial institutions

Case study

IsDB: Climate Change Adaptation Sector Guidance Note

Report

From disclosure to action: applying TCFD principles throughout financial institutions

Report

Beyond the Horizon

Report

Overview of Environmental Risk Analysis by Financial Institutions

Report

Charting a New Climate

Report

Taming the Green Swan: How to improve climate-related financial risk assessments

Tools and guidance

NGFS Climate Scenarios for central banks and supervisors

Report

Understanding physical climate risks and opportunities