Key Trends and Developments in Climate Risk

David Carlin

Head of Climate Risk

In this video, David Carlin will cover the key trends emerging in the climate risk landscape and also explore some of the noteworthy developments across the industry in the field of climate risk tools.

Climate & Biodiversity

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Key Trends and Developments in Climate Risk

6 mins 5 secs

Key learning objectives:

Understand the key trends and developments in climate risk assessments
Outline the main global developments within the climate risk landscape
Outline the main EU developments within the climate risk landscape

Overview:

We have established that climate risks are indeed financial risks and that financial institutions need to identify, assess, mitigate and manage these risks. Additionally they need to be aware of the main trends and developments in this space. This includes the regulatory developments in their respective jurisdiction as well.

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Summary

What are the 5 main trends and developments in the climate risk landscape?

1. Growing integration of different forms of Climate Risks within the Tools

2. Updated scenarios and a growing focus on net-zero commitments

3. Improved data availability and greater transparency

4. AI-empowered analysis and new ML-based methodologies

5. Development of more user-friendly and purpose-built tools to meet disclosure and regulatory needs

Why should financial institutions be aware of these trends and developments?

Net zero has become a global consensus and financial institutions are facing rising expectations to support the transition. This requires financial institutions to change business models, update strategy and manage risks effectively. Regulators are looking at new disclosure regulations and policymakers are pushing towards net zero goals. Enhanced management of social and environmental impacts, improved transparency through disclosure and reporting, and the setting of interim and long-term targets is becoming imperative. Hence, understanding and assessing climate risks and opportunities is of utmost importance.

What are some of the main developments in the climate risk landscape globally?

– TCFD recommendations (Task Force on Climate-Related Financial Disclosures) -Has put out 11 recommendations, used by more than 4000 organisations in over 100 countries.

– SBTi (Science Based Targets Initiative) - Helps validate targets and ensures both the general and sectoral decarbonisation targets are in line with the latest science.

– Sustainability Disclosure Standards - This is being developed by the ISSB and looks to harmonise existing sustainability standards across regulators and jurisdictions.

What are some of the main developments specifically in the EU?

– CSRD (Corporate Sustainability Reporting Directive) and the ESRS (European Sustainability Reporting Standards)

– EU Taxonomy - Provides definitions of ‘green’ investments

– SFDR (Sustainable Finance Disclosure Regulation) - Covers categorisation of financial products into different green asset classes and requires the setting of ‘robust’ transition plans

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David Carlin

David Carlin is an acknowledged authority on climate change and its implications for the financial system. He is the founder of D. A. Carlin and Company, an advisor to governments, corporates, and financial institutions on climate and ESG topics. He has authored numerous reports that provide practical tools for financial actors looking to address climate change and has run capacity-building programs for financial institutions and supervisors around the world. David led the creation of UN Environment Programme’s- Finance Initiative (UNEP FI)’s Risk Centre as the head of Risk. Over the past years, he has worked with over 100 global banks, investors, and insurers on climate scenarios, climate risk assessments, and climate governance. He has been an advisor to UNEP FI’s TNFD pilot program on nature and biodiversity related risks, the Net-Zero Banking Alliance (NZBA), and the Glasgow Financial Alliances for Net Zero (GFANZ). David is also a contributor to Forbes and a senior associate at Cambridge’s Institute for Sustainability Leadership (CISL) as well as a visiting fellow at King’s College London. David has worked as a Principal in Finance, Risk, and Public Policy for Oliver Wyman and in Model Risk Management for PNC Bank. His background is in quantitative modeling and decision science.

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