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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

Training materials

Mini-MOOC “Financial Climate Risk”

Case study

IsDB: Climate Change Adaptation Sector Guidance Note

Case study

Assessment of HSBC France’s exposure to physical and transition risks related to climate change

Report

What cannot be measured still must be managed

Report

Climate scenario guide

Report

Lenders’ Guide for considering climate risk in infrastructure investments

Report

2017 Climate Mainstreaming Practices Report

Report

Climate Guide to Asset Owners: Aligning investment portfolios with the Paris Agreement

Case study

Credit Agricole CIB’s Development of a Medium-Term Transition Risk Index

Case study

Crédit Agricole’s P9XCA methodology to assess the materiality of climate risks

Case study

TSKB’s Sustainability Management System (SMS): managing climate change-related risks and opportunities

Tools and guidance

Technical Supplement: The Use of Scenario Analysis in Disclosure of Climate-related Risks and Opportunities

Tools and guidance

Recommendations of the Task-Force on Climate-related Financial Disclosures

Report

Financing the energy transition: are World Bank, IFC, and ADB energy supply investments supporting a low-carbon future?

Report

Managing climate risks for financial actors: from theory to practice

Case study

ADB scales up the integration of physical climate risk management into its operations

Case study

Nordic Development Fund: pushing for excellence through climate change screening

Case study

YES BANK’s Environment and Social Policy (ESP) addresses climate risks through a multi-step implementation process with identified inter-department responsibilities

Case study

World Bank’s Climate and Disaster Risk Screening Tool helps identify short- and long-term climate and disaster risks for better risk management in development

Case study

ADB integrates Climate Risk Management Framework throughout operations