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The U.S. Securities and Exchange Commission's proposed climate disclosure rules, as reported in "New SEC rules spur demand for climate risk analysis" (March 8, 2024), mark a significant turning point for businesses and investors. These regulations require public companies to disclose their greenhouse gas emissions and climate-related risks, including physical and business risks. Organizations now seek expertise to help them understand, quantify, and report their climate-related vulnerabilities to comply with these new requirements.
The new SEC rules have sparked an unprecedented demand for climate risk analysis services. This surge in demand for climate risk analysis is further evidenced by financial institutions acquiring climate modeling and data companies, as highlighted in an earlier news "Wall Street is buying up climate modeling firms for their data". This development underscores the growing recognition among investors of the critical role that climate data and analytics play in assessing the potential impacts of climate change on investments and developing sustainable investment strategies.
As a leading research group in climate risk assessment and data stewardship at USU, our Climate Risk Group is well-positioned to help organizations navigate this complex and rapidly evolving landscape.
What we do:
What we do:
Our reputable research demonstrates that we offer extensive expertise in event diagnostics, climate prediction, and weather risk analysis. We provide a range of consulting services designed to empower businesses and financial institutions to proactively manage their climate-related risks and seize opportunities in the transition to a low-carbon economy.
Our group's proven expertise includes:
1. Climate risk assessments and scenario analysis
2. Greenhouse gas emissions accounting and reporting
3. Climate-related financial disclosures (TCFD)
4. Climate change adaptation and mitigation strategies
5. Sustainable investment and portfolio analysis
By partnering with our team, organizations can leverage cutting-edge climate data, modeling techniques, and risk assessment frameworks to make informed decisions, comply with emerging regulations, and build resilience in the face of climate change toward a more sustainable and prosperous future for your organization.
Background:
Background:
Physical risks from climate change
Physical risks from climate change
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Climate change is expected to increase the frequency and intensity of extreme weather events, such as floods, droughts, and wildfires.
These events can damage infrastructure, disrupt supply chains, and lead to losses in productivity.
The financial sector is exposed to these risks through its investments in physical assets, such as property and infrastructure, as well as its lending to businesses and households.
The impact of climate change on the financial system will vary across countries and regions, depending on their exposure to climate hazards.
ISO 14090
ISO 14090
By adhering to ISO 14090, organizations can ensure that their climate risk disclosures are not only comprehensive but also standardized.
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Disclosing climate risks is a complex task that involves various elements such as pre-planning, adaptation planning, implementation, monitoring, and evaluation. ISO 14090 provides a comprehensive framework that addresses these elements, making it well-suited for the task. The standard offers principles, requirements, and guidelines for assessing and managing the impact of climate change, including physical and financial risks. It aids organizations in building resilience and facilitates transparency in reporting and communication. ISO 14090 also supports scenario analysis for climate risk disclosure, helping organizations assess supplier ESG risks and make informed decisions. By adhering to ISO 14090, organizations can ensure that their climate risk disclosures are not only comprehensive but also standardized, making it easier for stakeholders to understand and act upon the information provided
ISO 14090 is an international standard that focuses on "Adaptation to Climate Change." It provides principles, requirements, and guidelines for managing the impact of climate change, including physical risks. The standard aims to help organizations build resilience against the effects of climate change by providing a structured framework for adaptation. While the search results did not specifically mention the data requirements or details on physical risks, ISO 14090 is designed to be a generic standard that can be applied across various sectors and industries.
The standard is often used in conjunction with other risk assessment methodologies, such as ISO 31000, to consider climate changes and their impact on physical assets and operations. It is part of a range of ISO standards in the area of climate change and is intended to be used for improving planning of adaptation to climate change, including the assessment of climate change-related risks.
Examples of climate risk data:
Examples of climate risk data:
Utah air temperature SSP8.5 2030
Utah air temperature SSP8.5 2070
The following data points can help organizations to accurately assess, report, and mitigate the risks associated with climate extremes.
1. Weather Data: Historical and real-time information on temperature, precipitation, wind speed, and other weather-related factors.
2. Climate Models: Predictive models showing potential future climate scenarios, including extreme events.
3. Asset Information: Details on physical assets that might be at risk, such as buildings, infrastructure, and land.
4. Supply Chain Data: Information on how extreme weather could affect supply chains, manufacturing, and distribution.
Sea level rise and flood threats for (from top) 2030, 2050, and 2070 for the Pearl Delta Area.
In addition to climate and weather extremes, business owners will need the following data to cope with climate risks:
5. Regulatory Compliance: Information on existing and potential future regulations related to climate risks.
6. Financial Data: Relevant financial metrics, such as insurance coverage, investment portfolios, and capital reserves.
7. Social and Demographic Data: Details on how climate risks might affect different populations or regions.
8. Environmental Impact Assessments: Studies on how climate change might affect the natural environment in regions where an organization operates.
9. Energy Consumption and Emission Data: Information on energy use and greenhouse gas emissions might relate to risks and responsibilities in a changing climate.
There are several ways to disclose physical risks of climate change. Common methods include:
There are several ways to disclose physical risks of climate change. Common methods include:
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Scenario analysis: This involves modeling the potential impact of climate change on a company's business or assets. This can be done by using historical data to project future climate conditions and then assessing the impact of these conditions on the company.
Impact analysis: This involves assessing the potential impact of climate change on a company's operations, supply chain, and customers. This can be done by identifying the company's exposure to climate hazards and then assessing the potential consequences of these hazards.
Risk management framework: This involves developing a framework for managing the risks associated with climate change. This framework should include a process for identifying, assessing, and mitigating these risks.
Climate risks transcend local boundaries, impacting not only specific regions but also the entire supply chain and trade routes of a business. What happens in one part of the world can reverberate globally, making climate risk a shared concern that requires coordinated action across industries and nations.
For instance, here are the risks for sea level rise and coastal flood threats based on SSP3-7.0, or about 3.6° Celsius of warming above pre-industrial levels by 2100, in the Pearl Delta Area, where most high-tech manufacturing in China is based.
Climate Risk Disclosure:
Climate Risk Disclosure:
Cases of Vietnam and Thailand
Cases of Vietnam and Thailand
Vietnam and Thailand are particularly important areas for understanding climate risk in financial risk disclosure. Both countries play significant roles in global supply chains and are susceptible to climate extremes such as flooding and typhoons. Understanding the climate risks in these regions is vital, as disruptions can have far-reaching impacts on global trade, investments, and economic stability, highlighting the interconnected nature of today's financial landscape.
Cutting-edge climate research:
Cutting-edge climate research:
Our peer-reviewed research indicates that the 2011 Thailand Great Flood was a manifestation of greenhouse gas-induced climate change, including increased pre-monsoon moisture and sea level rise. Our lab-directed research also found the pathway by which climate change increases Vietnam's extreme rainfall, creating risks.
Vietnam: Sea level rise and flood threats for the Mekong Delta estimated around (from top) 2040, 2060, and 2080.
Thailand: Sea level rise and flood threats for the Chao Phraya River Delta for (from top) 2040, 2060, and 2080.
This lab develops
This lab develops
Historical climate data: This data could be used to assess the historical exposure of assets to climate hazards, such as floods, droughts, and wildfires.
Projections of future climate conditions: This data could be used to assess the potential impact of climate change on assets, such as the potential for increased flooding or droughts.
Data on the company's exposure to climate hazards: This data could be used to assess a company's risks from climate change, such as flooding at a particular location.
Data on the potential impact of climate change on the company's operations, supply chain, and customers: This data could be used to assess the potential impact of climate change on the company's business, such as the potential for disruptions to supply chains or the loss of customers.
In addition to generating tailored data, we also provide services that help financial institutions to understand and use the data, such as:
Data analysis: This could involve developing tools that help financial institutions analyze the data and identify the risks they face.
Risk management frameworks: This could involve developing frameworks that help financial institutions to manage the risks associated with climate change.
Reporting and disclosure: This could involve developing tools that help financial institutions to report on their exposure to climate risks and to disclose this information to investors and other stakeholders.
By providing these data services, we could help financial institutions better understand and manage the risks associated with climate change.
How are climate risks calculated?
How are climate risks calculated?
Generating projected climate risks involves a multi-step process that begins with analyzing existing risk maps to understand current vulnerabilities. From there, climate model outputs are utilized, integrating historical weather data and current climate science to create future scenarios. This combination of localized risk assessment with global climate modeling allows for the development of comprehensive projections, illuminating potential impacts on areas such as infrastructure, economy, and public health. These insights provide valuable foresight, informing decision-making and risk mitigation strategies for a resilient future.
Our research-minded team specializes in producing tailored climate extremes information, empowering businesses to calculate their unique, industry-related risks. We provide customized projections that align with specific business needs and objectives by analyzing existing risk maps and utilizing advanced climate model outputs.
Our team offers detailed insight into potential climate impacts, which enables informed decision-making, allowing companies to proactively address challenges and strategize for a resilient and sustainable future.
Dr. Wang specializes in analyzing, attributing, and predicting climate extremes. He authored the AGU book Climate Extremes: Patterns and Mechanisms. This book was recognized with a 2018 PROSE Award* Honorable Mention in Environmental Science.
___________*PROSE Awards honor books that provide groundbreaking contributions to the scholarly community through rigorously researched, exceptionally edited and produced, and compellingly written works.
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