Harnessing climate data

Climate change is no longer a distant, theoretical threat. The impacts are already being felt today with severe societal and financial consequences. And while we have seen an improvement in climate-related financial disclosures over the last decade, particularly regarding transition risks, corporate reporting on physical risks, both acute and chronic, remains limited, incomplete and inadequate.¹ Our own analysis of company disclosures reveals significant variability and a lack of standardization in reporting on the impacts and preparedness for physical risk events.

Third-party analytics can bridge this gap by using climate risk models to provide forward-looking risk assessments under different climate scenarios. This data can offer insights on the financial impacts of acute and chronic physical risks on assets, helping investors assess and identify the prevalence of physical risk for investment portfolios and inform decision-making.

In this collaborative paper with Nest (National Employment Savings Trust) and Oxford Sustainable Finance Group, we set out to:

• Provide an overview of available datasets and models for investors and discuss their limitations.
  
• Share insights from our joint effort to integrate forward-looking physical risk data into the Nest UBS collaboration on climate investing.
• Discuss our respective efforts to expand analysis of physical risk across our investment universe, and how stewardship and engagement can address some of the challenges posed by poor quality data.
• Call on market participants to remind them of their roles in helping investors accurately assess physical climate risks to confidently integrate them in portfolios.
  

¹ World Resources Institute. Physically Fit? How Financial Institutions Can Better Disclose Climate-Related Physical Risks in Line with the Recommendations of the TCFD. Retrieved from link on 10.03.2025.