A collaboration between the finance sector and climate scientists has produced guidance on assessing the physical risks of climate change to infrastructure.
The Climate Measurement Standards Initiative (CMSI) was designed to support the G20’s Financial Stability Board’s Taskforce on Climate-Related Financial Disclosures (TCFD) and would provide banks and financial institutions with scientific and technical guidance on how to assess these risks.
Firms involved included Westpac, National Australia Bank (NAB), QBE, Suncorp and the Commonwealth Bank while the scientific research came from the CSIRO Climate Science Centre, Bureau of Meteorology, and leading universities.
The CMSI guidelines considered future climate change risks that were “chronic” and “acute” for the finance sectors for the years 2030, 2050 and 2090. Chronic risks were gradual changes to temperatures, rainfall, sea level, time in drought and days over 35°C while acute risks included tropical cyclones, east coast lows, extreme rainfall, hail, storm surges and bushfires.
Meanwhile, the financial guidelines recommended disclosures be made for 2030 and 2050 split up by portfolio, hazard and geographic region. Specific accounting items and metrics (listed in the CMSI guidelines) should be disclosed, in line with existing financial reporting accounting standards.
These should describe both the confidence and uncertainty in the critical assumptions made, with the scientific report providing views on the confidence in expected behaviour of physical risks under the two scenarios.
Shaun Dooley, chief risk officer at NAB, said: “This work will help develop a consistent finance sector approach to disclosure in line with the TCFD and make it easier to understand and compare disclosures. We hope the robust scientific information provided to support the use of scenarios for climate-related risk analysis will help build increased confidence in climate analysis undertaken by the finance sector and enable informed decisions about climate-related risks and opportunities.”
Prof David Karoly, leader of the Earth systems and climate change hub for the CSIRO, said: “The CMSI has provided our climate scientists with a unique and valuable opportunity to collaborate with experts from the financial services sector to explore and analyse the utility of the ‘best available science’ in assessing climate-related risks to Australian buildings and critical infrastructure.
“Framed by the TCFD recommendations, this work has been undertaken by Australian scientists, for Australian industry, but within a global context. Through the co-production process, the CMSI has enabled robust, peer-reviewed science-based evidence to inform industry risk and associated decision-making, thereby also supporting the national resilience agenda for Australia.”
