This playbook gives investors a simplified step-by-step approach to integrating the identification, assessment and management of physical climate risks in the investment process. It focuses on how to assess physical climate risks and identify adaptation and resilience (A&R) opportunities in the context of corporate finance. The playbook is product agnostic, and can be applied to the provision of capital across both equity and debt instruments.
It should also be noted that investors should evaluate climate risks in their entirety, including transition risks, to ensure the investment has a positive climate impact overall. The coverage of climate-related risks is limited to physical climate risk in this guidance, given the geographical scope of ARIC members on more climate vulnerable countries and on vulnerable sectors such as agriculture.
It addresses three key questions:
- What is physical climate risk?
- Why should investors assess and manage physical climate risks?
- How can physical climate risks be assessed and managed throughout the investment process?