Strategy overview

The primary objective is to support investors and other stakeholders in driving economy-wide adaptation and resilience. The report highlights that the physical impacts of climate change will cost the Australian and New Zealand economies hundreds of billions of dollars in the coming decades, primarily driven by physical damage and loss of life arising from extreme weather events.

Why the investment community needs a physical climate risk strategy

This section of the report highlights the significant role that institutional investors can play in addressing physical climate risks. They control large sums of capital, and their investment decisions can greatly influence the economic and environmental health of society. The section also outlines the benefits of a physical climate risk strategy for investors, governments, and the public.

Physical climate risks are financial risks

This section of the report argues limiting global warming to below 1.5 °C is insufficient to prevent significant physical damage caused by climate change. It explains IGCC’s commitment to addressing transition risks associated with climate change and the chronic and acute systemic physical risks that could jeopardise investments and the broader economy.

Integrate physical risk and resilience

This section of the report highlights that investors, companies, and communities are already experiencing the impacts of physical risk. However, most investors have not assessed physical risk across their whole portfolio. IGCC has a unique role in supporting its members in expanding their climate-related activities to include physical risk, which will increase the resilience of their investment portfolios and the communities they operate in.

Develop a shared understanding

Effective management and adaption of physical climate risks must be collaborative, dynamic, and multidisciplinary. A shared understanding of the risks and impacts of physical risks across all relevant stakeholders is an essential first step to achieving this. This section of the report discusses the development of international climate standards and methodologies, such as the Task Force on Climate-Related Disclosures (TCFD) and the International Sustainability Standards Board (ISSB). IGCC will ensure that investors have the skills to understand and implement these standards and methodologies, especially when mandatory climate disclosures are implemented in Australia and New Zealand.

Advocate for investable policy

This section of the report argues that policy must proactively address physical climate risks and facilitate investment in adaptation and resilience. Governments and regulatory bodies worldwide are increasingly recognising the importance of managing climate risks and implementing regulations that require financial institutions to assess and disclose their climate risk exposure. Investors must partner with governments to enact policies that increase resilience and reduce risk exposure from physical climate risks.

Deliver necessary private capital

Significant resources will be required to adapt and build resilience. Private capital is essential since this cannot be achieved solely through public funding and government initiatives. Institutional investors, with their experience managing complex risks, should play an important role in delivering private capital into adaptation and resilience, reducing damage and loss from climate change.