Climate change is having a profound impact on the planet, leading to more frequent and severe weather events, rising sea levels, and changing temperature patterns. These changes pose significant risks to businesses, infrastructure and communities. To understand, report on and address these risks, companies, financial institutions, governments and organisations need to conduct physical climate risk assessments.

What's the best way to get started?

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Step 1: Understand the need

The first step in embarking on a physical climate risk assessment is understanding why it's necessary.
Climate change can disrupt supply chains, damage infrastructure, and affect asset values. Recognising these potential impacts is crucial to making informed decisions about climate resilience.

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Step 2: Define the scope

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Next, you need to define the scope of your assessment.
This involves identifying which assets, locations, and operations are most vulnerable to climate risks. Consideration should be given to both current and future vulnerabilities, as climate change is an evolving challenge.
XDI’s rapid, low-cost screening solutions can help with this and are a good place to start.

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Step 3: Data collection

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Data is the foundation of any climate risk assessment.
Access to reliable, up-to-date data is critical for accurate risk assessment. But like all modelling, it’s complicated. That’s why an experienced, reliable data provider is so critical.
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Step 4: Data analysis

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Now you have the data, what is it actually telling you? And how do you act on it?
As your partner on the physical climate risk journey, XDI is here to help you every step of the way.
Our analysis quantifies the cost of extreme weather and climate change impacts to physical assets.

We deliver our results the way you want it: PDF, CSV, on-demand, APIs, even through visualization tools such as XDI Globe. Using the metrics you need to make decisions, in formats that facilitate integration with reporting, disclosure and presentation to stakeholders.

We even make the analysis easier to understand through our online data visualization tool, XDI Globe, which you can also use to test-run different adaptation options. 

The risks created by climate change can be both physical and transitional.
The physical risks arise from outcomes that are likely to reduce the value of certain assets and income streams such as more frequent and intense extreme weather events and higher than average temperatures.
Transition risks are associated with changes in policy, technology and behaviours that relate to the process of moving to a less emissions-intensive economy.

XDI specialises in physical climate risk analysis, however we also work with partners who focus on transition risk.

Climate scenario analysis

Climate risk assessments involve analysing different climate scenarios to understand potential impacts. In particular, understanding the risks associated with different emissions pathways is essential. By examining a range of scenarios, you can assess a wide spectrum of potential risks.
In our modelling, we offer scenarios that include time series of emissions and concentrations of the full suite of greenhouse gases known as Representative Concentration Pathway (RCP).
Read our FAQs for more. 

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Adaptation and mitigation strategies

Factors such as the magnitude of risk, potential consequences, and the ability to mitigate or adapt to the risk should be considered when prioritising actions. Mitigation and adaptation actions may include upgrading infrastructure, diversifying supply chains, or changing business processes to enhance resilience to climate-related risks.

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Stakeholder engagement

Climate risk assessments are not just an internal exercise. Engaging with stakeholders, including investors, customers, and regulators, is essential. Transparency and communication regarding climate risk management efforts are becoming increasingly important.

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Reporting and Disclosure

To build economic resilience, many governments are implementing mandatory climate risk reporting, pushing businesses and financial institutions to identify and act on their climate vulnerabilities.
A variety of frameworks are used for climate risk reporting and your jurisdiction will determine which ones apply to you. Most current disclosure mandates align with ISSB guidelines. 
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Integration with ESG Strategies

Climate risk assessments should be integrated into broader Environmental, Social, and Governance (ESG) strategies. Addressing climate risk aligns with broader sustainability goals and can drive positive reputational and financial outcomes.

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Ongoing monitoring and review

Climate risk is a dynamic challenge, and organisations must continually monitor and review their risk assessments and strategies. Regular updates and adjustments are necessary to account for new data, changing climate conditions, and evolving business circumstances.