What's the cost of falling short?

Welcome to?XDI’s Physical Risk Insights.?

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Every fortnight, we provide you with a summary of the latest news and analysis in the rapidly-evolving world of?physical climate risk.?

This week's update focuses on?disclosures, and the weather, with updates from the UK, Hong Kong, Thailand, Vietnam, India, and Sweden

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XDI Insight?

Flashback:?Last year XDI released the?XDI1000, a benchmark sample of 1,300 companies on eight global stock indices to?compare their exposure?to climate change extreme weather. If you’re looking for analysis of asset damage risk in your equities portfolio, start with our Multi-Company Intelligence capability.

Global ??:?News in brief -?disclosure, disclosure, disclosure

UK FCA Climate Risk Dashboard updated

The UK FCA has updated?its Climate Risk Dashboard?advising financial institutions on foundational, stretch and aspirational metrics and information for analysing climate risk. The updated Dashboard incorporates both recent regulatory developments and?progress made by industry in preparing climate related disclosures.

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HKEX releases consultation paper on climate risk disclosures

The Hong Kong Stock Exchange?has released a consultation paper?on climate risk disclosures for the 2,600 companies it regulates, following up?its commitment to implement mandatory climate risk disclosure. The deadline for comment is in July and the?measures are anticipated to take effect from January 2024.?

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Managing macroprudential risks: a review of climate stress tests

Staff at the Federal Reserve Bank of New York have produced?a paper reviewing bank climate stress tests. They highlight a number of areas for further research, including identifying channels through which plausible scenarios can lead to meaningful short-run impact on credit risks, given that bank loan maturities are generally fairly short, and assessing the?adequacy of climate risk pricing in financial markets.?The study also explores “compound risk” scenarios in which climate risks co-occur with other risks.

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Building capacity in Vietnam

UNEP-FI and GIZ?have released a report outlining best practices in climate risk disclosure in Vietnam, as part of a program to?build the capacity of Vietnamese banks to respond to climate risk.

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Next up: the industrials sector

UNEP-FI has also released its next sectoral risk briefing,?this time?exploring the key physical and transition risks?that banks, investors and insurers with?clients in the industrials sector face.

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Climate risk scenarios falling short

The UK Centre for Greening Finance and Investment has a paper on using climate risk scenarios in financial decision-making?which warns that current scenarios advocated for by central banks and supervisors, including the NGFS scenarios, "miss important characteristics and processes that we argue are critical to fully understand the potential severity and timescales of climate-related risks."?

UK Center for Greening Finance and Investment warns NGFS scenarios, "miss important characteristics and processes that we argue are critical to fully understand the potential severity and timescales of climate-related risks."?

Moving beyond the rhetoric

The Executive Director for Financial Stability Strategy and Risk at the Bank of England, Sarah Breeden?has given a speech to the Global Association of Risk Professionals?concluding that we?haven't yet reached the "tipping point"?whereby understanding of climate risk is informing strategic decision-making by financial institutions and firms.?

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Don’t neglect transboundary climate risks?

Stockholm Environment Institute (SEI) has released a?Global Transboundary Climate Risk Report,?as part of an?Adaptation Without Borders?collaboration. It discusses evidence for the emergence of?ten transboundary climate risks?and underscores the?necessity of global cooperation?to address these risks.

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Global ??: News in brief - It’s all about the weather

Brace for the storm as oceans heat up?

Temperatures in the world’s oceans have broken fresh records, testing new highs for more than a month in an “unprecedented” run that has led to scientists stating the Earth has reached “uncharted territory” in the climate crisis.?Experts believe that a strong El Ni?o weather event - a weather system that heats the ocean -?will also set in over the next months?and?risks more extreme weather events. Read the study in?Earth System Science Data.

Temperatures in the world’s oceans have broken fresh records, testing new highs for more than a month in an “unprecedented” run that has led to scientists stating the Earth has reached “uncharted territory” in the climate crisis.?

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Heatwaves in Asia threaten lives and productivity

An?extreme heatwave has affected broad swathes?of Asia. It's been?described as "the worst April heatwave in Asian history," and has set several all-time temperature records in Thailand, including?the country's highest ever record, at 45.4C. The heatwave, which is also affecting India, coincides with the?publication of an article in PLOS Climate?estimating?the impact of escalating heatwaves in India, threatening energy security, and health,?reducing outdoor working capacity by 15% by 2050?and reversing progress on sustainable development.?

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Flash droughts on the increase

A paper in?Science?shows that many?regions around the world have been tending towards more rapid onset "flash droughts" associated with amplified anomalies of evapotranspiration and precipitation deficit caused by anthropogenic climate change. The story received widespread?media attention.?

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Time to adapt

An article in?Nature Climate Change?investigates the representation of adaptation in quantitative climate change assessments, and makes some suggestions for filling gaps on this front.?

Global ??: News in brief - Other news of interest

Savills indexes climate risk of cities

Global?property services company Savills?has drawn on multiple data sources, including our Gross Domestic Climate Risk dataset, to?create an index of climate resilience?in the world's largest, wealthiest and most populous cities.?

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ChatClimate coming to you soon

A prototype?ChatIPCC has been built,?enhancing GPT-4?with information from the IPCC's Sixth Assessment Report. The research behind the creation?has been published and is linked here.