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