Carbon Asset Risk discussion document released by UNEP FI and World Resources Institute

The United Nations Environment Programme Finance Initiative (UNEP FI) and the Washington-based World Resources Institute think tank have published a discussion document to provide guidance for financial institutions to evaluate their exposure to ‘carbon asset risk’, the non-physical risks of climate change.

Currently being launched via a series of webinars, Carbon Asset Risk: Discussion Framework
was primarily written by Mark Fulton and Chris Weber and it’s the fruit of two years of work. Fulton is the former DB Climate Change Advisors Head of Research who now runs his own firm, Energy Transition Advisors while Weber is a consulting researcher at the WRI.

The 67-page report is a “resource for financial institutions” developed by WRI and the UNEP FI in consultation with more than 100 energy, climate and finance experts. UNEP FI is the UN platform with more than 200 members in the global financial community.

“This report provides objective, fact-based guidance to finance professionals for evaluating their exposure to the non-physical risks of climate change, called carbon asset risk,” the authors say.

“This type of financial risk is driven by non-physical factors during the transition to the low-carbon economy: changing public policy and private sector regulation, rapidly evolving technologies, unpredictable economic markets, and shifting public opinion.”The drafting team included Marisa Buchanan, Vice President, Sustainable Finance at JPMorgan Chase who chaired the Technical Working Group. Others in the team included Stan Dupré and Jakob Thomae of the 2° Investing Initiative and Gabriel Thoumi of Calvert Investments.

The webinars speakers include Fulton, Weber, Buchanan as well as Karsten Löffler, Managing Director at Allianz Climate Solutions and Chair of UNEP FI’s Climate Change Advisory Group and Rosemary Bissett, Head of Sustainability Governance & Risk at National Australia Bank.

The document is not intended to be a prescriptive methodology for carbon asset risk management. Rather it is intended to help financial intermediaries and investors think more “consistently and systematically” about carbon asset risk and highlight existing analytical tools.

It was funded in part with support to the World Resources Institute from Bank of America Foundation, Citigroup, JPMorgan Chase Bank and Wells Fargo Foundation. Drafting team members from the 2° Investing Initiative participated through financial support from ADEME, the French environment and energy management agency.