The impacts of climate change and
the necessary transition will impact almost every human and natural system. Successful companies and communities will be ones that are resilient in the face of these
challenges.
Developing climate resilience and contributing to a sustainable future requires action
today. Organisations that recognize this are seeking to better understand their climate
risks and opportunities and the strategies they should pursue. Climate risk tools can
assist in the decision-making process and by validating climate strategies and uncovering new insights about climate risk. The pace of development and deployment of
climate risk tools within the financial sector has been breath-taking.
UNEP FI’s 2023 Climate Risk Landscape report aims to assist financial actors in better
understanding this diverse and dynamic landscape of climate risk tools. The report
explores the major market trends in both physical risk and transition risk tools and
provides detailed analysis on dozens of individual tools. Some of the key findings
found within the report are as follows:
Greater integration of different climate risks within tools—tool providers have recognised the need for financial institutions to understand the full range of climate risks
faced by a counterparty of portfolio. This has led to the expansion of integrated physical and transition risk tools as well as additional coverage of specific hazards within
physical and transition risk assessments. This work is still ongoing and many risk interaction effects and tipping points are not typically captured.
Focus on net-zero commitments within tools—as countries and companies around the
world set ambitious targets for reducing greenhouse gas emissions, climate risk tools
are being developed to help them set targets, assess their alignment, and implement
their net-zero strategy. That has included the incorporation of a greater range of net-zero
scenarios within tools as well as greater granularity for sectoral decarbonisation pathways.
Rising regulatory demands are accelerating tool use and functionality—mandates for
climate-related financial disclosures have come into effect in jurisdictions across the
world. Regulatory climate scenario exercises and climate stress tests are becoming
The 2023 Climate Risk Landscape 9
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more common as well. This regulatory pressure has both expanded the demand for
climate risk tools and also resulted in a growing suite of purpose-built tools, designed
to address climate disclosures and scenario exercises.
New data and new insights are top priorities for financial institutions—many institutions involved in UNEP FI’s working group on climate risk tools expressed a desire for
tools to continue to progress on addressing data gaps and offering decision-useful
information. As climate tools become more central to financial analysis, institutions
appear excited to explore leading-edge data and decisioning techniques such as those
offered by geospatial data and machine learning algorithms.
These trends and many others are explored in greater depth throughout the report.