A new and comprehensive report from the United Nations Environment Programme (UNEP) has warned that tools and methodologies used to analyse climate risk do not fully capture the full impacts of climate change.
The report, from UNEP’s Finance Initiative, found that “secondary effects of climate change including knock-on economic impacts, public health shocks or migration caused by the physical impacts of climate change have not been adequately modelled by existing methodologies.” It warned that this may constitute “a considerable blind spot”.
The report assessed the capabilities of over 20 climate risk tools and methodologies from a range of climate risk service providers and compared them according to scope, range of compatible climate scenarios, level of analysis and other factors. In response to the problems identified, it called for more public research funding, pointing to the European Union-funded Cascades project as an example of modelling trade and supply chains.
The UNEP investigation of climate risk methodologies follows last month’s release of a widely publicised paper in Nature Climate, warning of the potential misuse of climate models by businesses, the financial services industry and regulators.
“Businesses want to know which of their assets and operations are at risk of flooding, cyclones or wind damage and when, but providing that information using existing global climate models is a struggle,” said co-author Professor Andy Pitman from the University of New South Wales. “There is, of course, very useful information available from climate models, but using it in assessing business risk requires a bespoke approach and a deep engagement between business and climate modellers. A whole host of issues can trip up the unwary.”
The warnings about climate risk tools and methodologies comes during a period of consolidation in climate risk reporting and disclosure. The UNEP report predicts that increased demand for standardisation will likely push climate risk service providers to use uniform reference scenarios such as those developed by the Network for Greening the Financial System.
This page was last updated April 23, 2021
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