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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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Featured Pathways

More pathways

Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Book a demo

Pricing

Ready to get started?

Plans & Membership

Our Platform

Expert led content

+1,000 expert presented, on-demand video modules

Learning analytics

Keep track of learning progress with our comprehensive data

Interactive learning

Engage with our video hotspots and knowledge check-ins

Testing & certification

Gain CPD / CPE credits and professional certification

Managed learning

Build, scale and manage your organisation’s learning

Integrations

Connect Finance Unlocked to your current platform

Featured Content

More featured content

Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

More featured content

Book a demo

Pricing

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Book a demo

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Climate Risk Methodologies

Climate Risk Methodologies

David Carlin

Head of Climate Risk

In this video, David Carlin gives an overview of some of the current climate risk methodologies used by climate risk tool providers and he explores some of the approaches and general workflow for assessing both transition and physical climate risk.

In this video, David Carlin gives an overview of some of the current climate risk methodologies used by climate risk tool providers and he explores some of the approaches and general workflow for assessing both transition and physical climate risk.

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Climate Risk Methodologies

5 mins 17 secs

Key learning objectives:

  • Understand the general process workflow and approach to transition risk assessment

  • Understand how physical risk assessment is conducted

Overview:

It is clear that there are a lot of factors for financial institutions to consider when carrying out a climate risk assessment. Transition risk assessment generally involves backward and forward-looking data, while physical risk assessment considers hazards, vulnerability, and exposure. The best way to approach this is through a comprehensive and multidimensional approach that covers both physical and transition risks.

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Summary

How can we approach transition risk assessment? 


Transition risk assessment uses two sets of data:
  1. Backward looking dataset - Reflects the status quo (eg: current emissions)
  2. Forward looking dataset - Projected for scenarios of different possible futures

Then different metrics are used to assess different types of risks, impact assessment, alignment strategy and target setting. Most of the tools that perform transition risk assessment use a general analysis structure. When users provide data inputs, climate risks can be identified through transition risk scenarios. Depending on the different channels, these risks can then transmit into financial risks as well as producing financial opportunities. The results or analysis output are often shown as some kind of climate-adjusted financial risk indicator. 

What is the general workflow used in transition risk assessment? 


It begins with selecting a target temperature alignment or warming limit that the client company or institution wants to align with, often following a specific scenario or pathway. Next, socio-economic parameters, such as the level of technology development and economic development, will be identified. Then, those assumptions are then fed into a climate model that experts will use to generate analysis on what the pathway will look like to that particular temperature outcome. 

How is physical risk expressed?


Physical risk is generally expressed as:

Risk =Hazard x Vulnerability x Exposure

  • Hazards refer to potentially damaging physical events or human activities that harm the environment, human health, or cause economic disruption. 
  • Exposure relates to the risk faced by assets in climate events.
  • Vulnerability refers to the susceptibility to those hazards when thinking about physical, social, and economic factors.

How are physical climate risks assessed? 


The 6-step process as outlined by the World Bank:
  1. Define needs and objectives
  2. Identify available data and resources
  3. Define the scope and approach
  4. Generate relevant scenarios
  5. Estimate the impacts
  6. Present and interpret the final results.

Tool vendors can measure hazard, exposure, and vulnerability at different levels like: country, regional, sectoral, company, or portfolio level. Then considering various variables that impact supply chain disruptions, productivity loss, and overall financials. Physical risk assessment outputs can then be expressed in  metrics such as climate value-at-risk, physical risk score amongst others

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David Carlin

David Carlin

David Carlin is the Head of Climate Risk and TCFD Programme at UNEP FI where he has worked with over 100 financial institutions to explore the risks and opportunities presented by climate change and the transition to net zero. He also conducts research at the intersection of climate, nature, and finance at Cambridge’s Institute for Sustainability Leadership. David is also an advisor to governments, firms, and solutions providers as he helps them to explore how they can integrate sustainability and climate-readiness into their strategies and operations.

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