As players in the global economy recognize that climate change presents financial risk to corporations, financial markets and shareholders need comprehensive, high-quality information on the impacts of climate change. The Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) has created a framework for disclosure that is increasingly in the mainstream. The quantitative assessment of physical risk, however, remains a challenge for most companies given the emerging nature of these types of analyses. This paper will present the key elements to consider and basic steps to take to assess climate-driven physical risk to a corporation’s facilities, employees and supply chains. Identifying relevant threats and assets and projecting how climate change exacerbates the threats into the future are key early steps which, while intuitive, can be complex to accomplish without subject matter expertise. Defining a level of risk aversion to select appropriate climate change scenarios is an additional step, critical in the process, that can dictate the level of exposure that assets have to a natural hazard under climate change conditions. The paper will explain the key considerations in these early process steps. The paper will be structured as a “how to start” guide with examples of projects where risk has been assessed. The paper will include examples where no previous work on climate-related vulnerability information has been available, and examples where some natural hazard vulnerability is known, and resilience solutions were evaluated and recommended.
