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22nd January 2018 - Acclimatise, Climate Finance Advisors (CFA), and Four Twenty Seven have released a new guidance document to increase the climate resilience of large infrastructure investments. The “Lenders’ Guide for Considering Climate Risk in Infrastructure Investments” clearly breaks down the ways in which physical climate risks might affect key financial aspects of prospective infrastructure investments. Ten sub-sectors, including airports, marine ports, gas and oil transport and storage, power transmission and distribution, wind-based power generation, data centres, telecommunications, commercial real estate, healthcare, and sports and entertainment, are analysed and illustrated with topical examples.

“Since Paris, private investors and asset owners have increasingly focused on what investment risks and opportunities are created by climate change. The Lender’s Guide developed by Acclimatise, Climate Finance Advisors, and Four Twenty Seven provides the first practical approach to assessing the impact of climate change on infrastructure investments for owners, developers, and lenders. For the first time, the guide provides infrastructure investors and lenders with a concrete approach to climate risks and opportunities,” said Jay Koh, Chair of the Global Adaptation & Resilience Investment (GARI) Working Group.

Cover of the new Lender’s Guide for considering Climate Risk in Infrastructure Investments

This guide provides a framework for questioning how revenues, costs, and assets can be linked to potential project vulnerability arising from climate hazards, such as increasing temperatures or sea-level rise. A heightened frequency of extreme weather events may lead to more disruptions of infrastructure service delivery resulting in lower revenues and increased expenses. In the United States for example, hurricane damage in 2017 to infrastructure in key economic centres, such as Houston, Texas, exceeded tens of billions of dollars (USD), not to mention losses to revenues and increased operating costs due to recovery efforts. In addition to the well-known costs from Hurricane Sandy to New York City’s transit infrastructure, that storm also led to 893 flights cancellations and knocked out about 25% of cell towers belonging to all carriers in a coastal area spread over 10 US states, leading to service (and therefore revenue) disruptions for infrastructure assets far beyond New York City. Additionally, incremental changes in climate such as water resource availability or temperatures are also likely to affect the operational and economic performance of infrastructure over time. Reduced precipitation can for instance decrease river flow and negatively impact the operability of hydropower facilities.

The guide also draws attention to the potential opportunities emerging from resilience-oriented investments in infrastructure. Concrete measures, such as replacing copper cables with fibre-optic ones, have proven successful in enhancing the ability of infrastructure to cope with extreme events and increasing revenue for companies who undertook such transformations.

John Firth, CEO of Acclimatise, states “Understanding the risks, as well as any opportunities, that might arise from a changing climate is paramount to infrastructure investments. This guide helps lenders integrate climate risks and opportunities into their strategic planning, hence improving the performance of their investments. Such a process feeds into the recommendations of the Financial Stability Board’s (FSB) Task Force on Climate-Related Financial Disclosures (TCFD). ”

Stacy Swann, CEO of Climate Finance Advisors notes that “Financial institutions play a pivotal role in scaling up and directing finance to address climate change. As a general matter, these institutions are always weighing risks against potential returns when seeking good, sustainable investments. Yet, climate risks are often overlooked in this process. This guide can help investment and credit officers begin to ask the right questions about how climate change can impact the financial sustainability of their investments, leading to better – more sustainable – investment decision-making.”

Yoon Kim, Director of Advisory Services at Four Twenty Seven adds “Incorporating climate change considerations into infrastructure investments enables investors proactively to identify and address the risks and opportunities presented by climate change. This guide helps investors and lenders unpack the question of how physical climate risks may affect key considerations related to infrastructure investments to inform investment decisions that make sense now and into the future.”

As the international community is moving forward with the implementation of the Paris Agreement, critical issues such as catalysing resilient investments occupy centre stage and raise questions across various fora, such as GARI. This guide emerged from ongoing discussions among participants of GARI during 2017, and is part of a growing global effort to deliver guidance to corporates and financial institutions to implement the TCFD recommendations.

Download “Lenders’ Guide for Considering Climate Risk in Infrastructure Investments” by clicking here.

About Acclimatise

Acclimatise is a UK-based climate change advisory and analytics company that specialises on climate change adaptation and resilience building. Acclimatise is a trusted advisor for many organisations across a wide range of sectors including government, finance, insurance, water, energy, transport, mining, agriculture, defence, food and beverages, and international development. The company’s 24 staff have successfully worked on more than 350 projects in over 70 countries for 180 public, private and non-governmental organisations. Acclimatise is currently involved in complementary projects for the European Bank for Reconstruction and Development, the Global Centre of Excellence on Climate Adaptation and the United Nations Environment Programme – Finance.

For more information, visit acclimatise.uk.com, follow us on LinkedIn, Twitter, and Facebook, and subscribe to our newsletter.

Acclimatise contact: Elisa Jimenez Alonso e.jimenez-alonso@acclimatise.uk.com

About Climate Finance Advisors

Climate Finance Advisors (CFA) is a consulting and advisory firm based in Washington, DC with extensive experience in development, finance, sustainability, and climate change. CFA’s mission is to facilitate the acceleration of sustainable, climate-smart investments and to encourage the integration of climate considerations into investment decision-making and underlying investments. The CFA team is comprised of bankers and finance professionals with more than 75 years’ collective expertise working at the intersection of finance, climate change, infrastructure and project development. The CFA Team has a deep understanding of the financial implications of climate risk for investments, and understands how risks are integrated into the investment decision making process.

For more information, visit www.climatefinanceadvisors.com, LinkedIn, Twitter and subscribe to the newsletter.

CFA contact: Stacy A. Swann sswann@climate-fa.com

About Four Twenty Seven

Four Twenty Seven is an award-winning market intelligence and research firm specialized in the economic risks of climate change. Four Twenty Seven’s data analytics solutions bring climate intelligence to economic and financial decision-makers. Four Twenty Seven provides financial portfolio climate risk assessments, development of climate resilience strategies, quantification of metrics and indices for benchmarking, monitoring and evaluation, and training and stakeholder engagement to financial institutions, Fortune 500 corporations, and governments worldwide. The company was founded in 2012 and is headquartered in Berkeley, California with offices in Washington, DC and Paris, France.

For more information, visit www.427mt.com, LinkedIn, Twitter, Facebook and subscribe to the newsletter.

Four Twenty Seven contact: Yoon Kim ykim@427mt.com 

About GARI

The Global Adaptation & Resilience Investment Working Group (GARI) is a private investor-led initiative that was launched at COP21, the global climate summit in Paris in 2015. GARI is a partner of the UN Secretary General’s A2R Climate Resilience Initiative. GARI has brought together over 150 private and public investors, bankers, leaders and other stakeholders to discuss critical issues at the intersection of climate adaptation and resilience and investment with the objective of helping to assess, mobilize and catalyze action and investment.

For more information on GARI, please see: www.garigroup.com.

Cover photo by Matt Artz on Unsplash