Report of the C-level ESG Risk Roundtable Physical Risks Workstream

NEW REPORT AVAILABLE!

Report of the C-level ESG Risk Roundtable Physical Risks Workstream

Brussels, 26 September 2024 - The latest report of the C-level ESG Risk Roundtable is a result of the join work of the Climate Physical Risk WS members facilitated by Groupe Crédit Agricole and Société Générale as workstream leaders.

The objective of the report was to collect current practices as well as the common challenges encountered, with the aim to identify possible "quick wins" to overcome the challenges. While initially focused on Pillar 3 disclosures for Environmental, Social and Governance (ESG) risks, the WS discussions extended to cover broader risks management practices, with focus on climate physical risk.

The practices to disclose climate physical risk exposures as part of Pilar 3 ESG differ significantly, due to differences in the reporting format and scope, assessment methodologies and parameters, as well as definition and selection of the hazards, preventing comparison of exposure across banks. The report suggests approaches to overcome the key identified challenges such as hazard definition, categorization and selection.

The report also touches on issue of data sourcing, data inconsistencies as well as scenarios selection and time horizons used. At this stage, WS members recommend greater transparency on scenarios selection and chosen time horizons.

Other topics explored in the report include the challenges related to asset localisation, value chain considerations and the role of insurance in risk identification process.

The WS members intend to continue discussing topics such as assessment of the financial impacts of the climate physical risk for the bank, considerations of mitigation and adaptation measures as well as integration of the climate physical risk in the risk framework.

To read more about the climate physical risks management, the challenges identified, and approaches suggested to overcome the challenges, please refer to the full version of the report.