A clear understanding of risk, allows prioritisation and developing of clear plans and actions. We endorse a risk assessment and adaptation approach that is flexible, and reflects the deep uncertainty in the climate projections, however recognises the need for clear decisions and actions now that lessen risks of lock-in or maladaptation.
Our approach to assessing climate risk is tailored to the individual client needs. At a high level, this generally follows the methodology presented by the Task Force on Climate-Related Financial Disclosures (TCFD) which includes consideration of:
- Physical risks from acute and chronic climate hazards to communities, natural environments, infrastructure and property, supply chains etc.
- Transition risks: resulting from the transition to a low-carbon economy, that include market risks, policy and legal risks, reputational risks etc.
The diagram below illustrates how these can propagate, and how broader macro-environment risks can affect an organisation as well, ultimately leading to a range of potential secondary risks and impacts to financial performance.
We can also assist clients with adaptation planning, as well as strategies to reduce carbon emissions. Our adaptation planning is informed by initial risk assessments and we recommend a process as outline below.