2:00 PM - 2:15 PM
[HCG26-02] Rapid Progress of Climate Change Adaptation and Regulation in Financial Sector and Examination of Climate-related Risk Analysis Methods
Keywords:Climate-related Risk, TCFD, NGFS
Due to climate change, extreme weather events and weather disasters are becoming more severe and frequent. Attention to the increasing risks caused by climate change has led to a growing need for countermeasures by the financial industry and private sector. The TCFD (Task Force on Climate-related Financial Disclosure) Declaration, released in 2017, requires financial institutions and public companies to disclose climate-related risks as financial information, and In Japan, 687 financial institutions and business corporations, the largest number in the world, have expressed their support (as of the end of January 2022). These adaptation actions can be said to be due to the widespread recognition by financial institutions and business corporations that climate change countermeasures are no longer a social contribution but necessary for their own survival (Yamazaki et al., 2022).
Several methods and tools for analyzing climate-related risks have been published by international organizations and are now in practical use. CLIMADA, developed by a research group at the Swiss Institute of Technology, and ClimateWise, developed by the University of Cambridge Institute for Sustainability Leadership (CISL), are representative examples. However, due to the rapid increase in the demand for information disclosure over the past few years, research and development has not been able to keep pace, and various issues have been highlighted, such as the lack of uniformity in information disclosure methods. Although Japan's Financial Services Agency and the Bank of Japan also rush to assess climate-related risks, they are faced with difficulties due to the lack of sufficient knowledge and data. The purpose of this study is to examine the risk-specific climate scenarios used in the analysis of climate-related risks, to organize the issues involved, and to identify the gap between the results of climate science research to date and the information and data required by finance. As a research methodology, we conducted interviews with financial institutions and business corporations and a literature review to quantitatively validate the climate risk analysis tool CLIMADA.
As a result of the literature review, it was found that several international organizations have published climate scenarios separately, and the consistency and scientific validity of the scenarios have not been sufficiently verified. In other words, various climate-related risks have been assessed independently with separate methodologies and different metrics. In particular, the integrated assessment of climate-related risks is still difficult due to the different GHG emission pathways of transition and physical scenarios. We plan to conduct further research and will present the results of CLIMADA validation as well as findings from interviews with financial institutions and private businesses.
Several methods and tools for analyzing climate-related risks have been published by international organizations and are now in practical use. CLIMADA, developed by a research group at the Swiss Institute of Technology, and ClimateWise, developed by the University of Cambridge Institute for Sustainability Leadership (CISL), are representative examples. However, due to the rapid increase in the demand for information disclosure over the past few years, research and development has not been able to keep pace, and various issues have been highlighted, such as the lack of uniformity in information disclosure methods. Although Japan's Financial Services Agency and the Bank of Japan also rush to assess climate-related risks, they are faced with difficulties due to the lack of sufficient knowledge and data. The purpose of this study is to examine the risk-specific climate scenarios used in the analysis of climate-related risks, to organize the issues involved, and to identify the gap between the results of climate science research to date and the information and data required by finance. As a research methodology, we conducted interviews with financial institutions and business corporations and a literature review to quantitatively validate the climate risk analysis tool CLIMADA.
As a result of the literature review, it was found that several international organizations have published climate scenarios separately, and the consistency and scientific validity of the scenarios have not been sufficiently verified. In other words, various climate-related risks have been assessed independently with separate methodologies and different metrics. In particular, the integrated assessment of climate-related risks is still difficult due to the different GHG emission pathways of transition and physical scenarios. We plan to conduct further research and will present the results of CLIMADA validation as well as findings from interviews with financial institutions and private businesses.