Corporate reporting on physical climate risks remains “limited, incomplete and inadequate”, according to a report co-authored by National Employment Savings Trust, London and UBS Asset Management.
The report, which included input from the Oxford Sustainable Finance Group, analyzed company disclosures and argued there was significant variability and a lack of standardization in reporting on the impact of and preparedness for physical risk events.
Climate change is also “no longer a distant, theoretical threat” the report claimed, adding that extreme weather events linked to climate change, such as unprecedented heatwaves, wildfires, floods, and droughts, have resulted in extensive loss of life and caused billions in economic damages globally, often without adequate insurance coverage.
According to the report, third-party analytics can bridge this gap in physical risk assessments by using climate risk models to provide forward-looking assessments under different climate scenarios.
Katharina Lindmeier, head of sustainability strategy at NEST, said in a news release: “The economic impact climate change is having on our world, through extreme weather events, is clear to see. We want to better manage this risk in our portfolio. We want to invest in companies that are futureproofing for a more volatile climate.”
The report also argued that companies should quantify and disclose risks in a granular, location-specific manner, that capital markets and regulators must adopt standardized approaches to integrating physical climate risk, and that there should be an expansion on investor engagement on physical risks through stewardship programs.
NEST had approximately £50 billion in assets as of Mar. 1.
