The
University
of
Waterloo
has
developed
a
tool
to
help
the
capital
markets
incorporate
physical
climate
change
and
extreme
weather
risk
into
investment
decisions.
Researchers
at
Waterloo's
Intact
Centre
on
Climate
Adaptation
developed
a
climate
risk
framework
which
will
help
institutional
managers
to
guide
investments,
securities
commissions
to
assess
disclosure,
and
credit
rating
agencies
to
measure
risk
by
incorporating
the
impacts
of
climate
change
into
business
analysis.
"Climate change is irreversible, impacting every aspect of our lives, including the capital markets," said Blair Feltmate
"Climate change is irreversible, impacting every aspect of our lives, including the capital markets," said Blair Feltmate, Water Institute member, professor at Waterloo and head of the Intact Centre. The Intact Centre authored the new report profiling the Climate Risk Matrix, which identifies the most impactful climate change related impacts, specific to industry sectors.
The incentive to write the report came from the Task Force on Climate-Related Financial Disclosures and Canada's Expert Panel on Sustainable Finance. As suggested by the expert panel's chair, Tiff Macklem, the Climate Risk Matrix "provides a solid and practical way to assess and value physical climate risks."
"We
now
have
a
framework
that
uses
climate-related
data
with
existing
valuation
models
to
determine
a
company's
climate
change
risk
exposure
in
financial
terms,"
said
Sonia
Baxendale,
President
and
CEO,
Global
Risk
Institute.
"The
outputs
from
this
framework
will
be
invaluable
to
regulators
and
investors
by
filling
in
data
gaps
that
are
crucial
for
effectively
assessing
risk."
"Climate
change
and
extreme
weather
risks
can
represent
challenges
for
capital
markets,"
said
Brian
Porter,
President
and
CEO
at
Scotiabank.
"This
report
provides
practical
guidance
that
will
help
the
financial
sector
to
better
incorporate
climate
risk
into
financial
valuation."
Image credit: NYSE via Pixabay
The
report,
"Factoring
Climate
Risk
into
Financial
Valuation,"
was
generously
supported
by
the
Global
Risk
Institute
(GRI),
Scotiabank
and
Intact
Financial
Corporation,
and
presents
Climate
Risk
Matrices
for
the
Commercial
Real
Estate
sector
and
the
Transmission
and
Distribution
of
Electricity.
The
report
identified
that
the
next
sectors
best
suited
for
Climate
Risk
Matrix
development
are
Materials,
Energy,
Utilities,
Industrials
and
Real
Estate.
Mark
Carney,
Governor
of
the
Bank
of
England
and
Special
Envoy
on
Climate
Action
and
Finance
to
the
United
Nations,
warned
that
climate
disclosure
must
become
comprehensive,
climate
risk
management
be
transformed,
and
sustainable
investing
go
mainstream.
Climate
Risk
Matrices
offer
a
practical
and
readily
deployable
means
to
act
on
Carney's
warning.