Navigating a New Climate: Assessing Credit Risk and Opportunity in a Changing Climate - Outputs of a Working Group of 16 Banks Piloting the TCFD Recommendations Part 2: Physical Risks and Opportunities

This report aims to help banks begin to address the “Strategy” element of the TCFD recommendations, which requires forward-looking scenario-based assessments of risks and opportunities. TCFD outlines three recommended disclosures within the “Strategy” element that organizations (including banks) should address: a. The climate-related risks and opportunities the organization has identified over the short, medium, and long term; b. The climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning; and c. The resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2oC or lower scenario. This report sets out initial methodologies for banks to assess the risks and opportunities from the physical impacts of climate change in their loan portfolios, to help banks make progress on these topics. The report also provides case studies from banks who have piloted the methodologies, to provide practical experience and insights into the challenges and benefits of undertaking these assessments.