Risk and resilience: addressing physical climate risks in infrastructure investment
Risk and resilience: addressing physical climate risks in infrastructure investment
This paper focuses on the need to incorporate physical climate risks in infrastructure design and investment decision-making. It presents how the Coalition for Climate Resilient Investment (CCRI) is addressing the ‘climate resilience market failure’ through the implementation of tools, methodologies and principles to help the various stakeholders involved in infrastructure, including the financial industry, build resilience to a changing climate. According to the report, a global coalition of institutional investors, banks, insurers, rating agencies and governments representing over US$20 trillion in assets, three key factors are responsible for the chronic under investment in climate resilience by the private sector: Lack of analytical tools to quantify the exposure of assets to physical climate risks; Difficulty in determining and comparing resilience options; and Investors not adequately adjusting their expected returns or cost of capital to account for such risks.