Introduction

Hard-to-abate (HTA) sectors, including iron and steel, cement, chemicals, and long-distance transport, are essential to the real economy, yet disproportionately exposed to climate transition and physical risks [p. 3]. The objective of this paper is to develop and validate a foundational, risk-based Resilience Indicator (RI) for HTA industries that is transparent at the indicator level and usable in investment decision-making [p. 3]. A resilience lens maps directly to cash-flow stability and downside risk [p. 4].

Background

HTA sectors share structural features that make resilience assessment both necessary and non-trivial [p. 5]. Decarbonisation pathways are characterised by high abatement complexity, large infrastructure dependencies and uneven near-term feasibility across regions [p. 5]. Strategic misalignment, such as delayed adoption of credible low-carbon technologies, can persist, raising the probability of stranded assets and cash-flow stress under tightening policy and market conditions [p. 5]. The RI therefore uses externalities-informed indicators selectively as exposure and sensitivity drivers and as adaptive capacity signals [p. 2].

Data & methodology

The RI 1.0 is an issuer-level composite indicator designed to capture climate-related resilience in HTA sectors across two core domains: Transition Resilience and Physical Resilience [p. 10]. Governance and Strategy serves as an enabling layer across both domains [p. 10]. The report weights Water Stewardship & Water Stress at 17%, Biodiversity, Land Use & Footprint at 14%, and Climate Strategy, Transition Plan & Risk Management at 12% in the category aggregation [p. 18].

Results

In order to demonstrate the RI 1.0, the report derives the indicator for two HTA sectors, namely the GICS Sub-industries “Diversified Metals & Mining” as well as “Construction Materials” [p. 12]. The performance is computed based on metric weights and category weights to aggregate performance [p. 12].

Discussion

A risk-based RI can materially re-rank issuers within HTA sectors because it emphasises credible transition execution and physical robustness rather than broad topic aggregation [p. 13]. Two issuers can disclose at similar levels and receive similar ESG ratings yet differ in resilience if one exhibits stronger CapEx credibility, technology feasibility, and cost pass-through capacity while the other is more exposed and less able to adapt [p. 13].

Conclusion

HTA sectors face a distinctive mix of non-linear transition constraints and rising physical climate risks [p. 15]. The report recommends progressing to RI 2.0 by integrating geospatial and asset-level overlays, such as site verification and hazard layers, to improve physical risk precision and strengthen validation designs [p. 2].