The document summarizes the findings of a physical climate risk analysis conducted on a sample portfolio provided by UNEP FI. Key insights include: - River flooding and coastal flooding pose the highest risks to assets in the portfolio. - The largest risks are concentrated in real estate assets in Canada, Australia, South Africa, Turkey, and the US. - Assets in the 'real estate activities' sector face the greatest overall risk in the portfolio.

1. November 2023
Portfolio Findings

2. About CRS
Climate Risk Services (CRS) is an advisory firm
and product developer, founded in December 2019
by Gerhard Mulder and Stephanie Gnissios with
offices in Utrecht (NL) and Oxford (UK).
We build climate and nature smart organisations
by helping clients increase their resilience to
climate change and nature degradation.
We turn scientific data into fit-for-purpose
information to help clients understand how to
manage climate and nature risks and take
advantage of related opportunities.
We then support them to embed climate and
nature into strategic decision-making and risk
management within governance frameworks.

3. Climate Risk Services page
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UNEP-FI initiative on physical risk data
Banks face critical issues in understanding, assessing, and managing physical climate risks
across financial portfolios. The most cited obstacle in managing climate risks effectively -
data scarcity and poor data quality.
CRS has been working with UNEP FI members to improve the climate risk landscape by
gathering, analysing, and leveraging high-quality data, and subsequently employ this data
for informed decision-making.
This document is in response to the UNEP FI Piloting exercise - Physical risk assessment. A
dummy portfolio has been provided to all data providers. This document is a summary of
the physical risk analysis done by using the CRS platform.

4. Climate Risk Services
ECB Good Practice
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Our approach follows the ECB good practice for climate-related
and environmental risk management:
An institution identifies physical risk drivers by sector based on the
work of an international climate research agency. It assigns a
sensitivity score from very low to very high to each sector taking
into consideration the vulnerability of the specific economic
activities (e.g. power generation) to a physical vulnerability (e.g.
drought). It does so by geography, creating a sector-geography
matrix of impact scores. It subsequently maps its exposures to the
associated matrix and adds up its exposures by sensitivity score to
produce a first heat map of geographies and physical risk drivers.
The heat map is used to determine areas for deeper analysis.

5. Executive Summary
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What is in a portfolio scan?
• High-level analysis of physical climate risks in a loan book or
portfolio of assets
• Uses sector-geography pairs as set out in best practice
guidance (ECB)
What are the key insights?
• Assets/loans at risk: identify percentage of assets/loans
with high risks and evaluate risks on a loan-level
• Key risk drivers: identify key physical hazards (e.g., flooding,
water stress, wildfire) and transition risk drivers (carbon
pricing, pressure to cut emissions) driving risks
• Key sectors: identify key sectors (NACE level 1 and 2) at risk
• Key locations: identify provinces where sectors at risk are
located
How can these insights be used?
• Results should be used to indicate areas for
due diligence (sector, province, and
hazard concentrations)
• Results should
inform materiality thresholds and risk limits
• Results should inform conversations with
key clients at risk: do they have processes in place
to mitigate risks and can further financing be provided
to reduce risks?
Hazard
score
(0-5)
Sensitivity
score
(1-5)
Risk score
(0-25)

6. Physical Risk – scoring rubric
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Source: CRS Methodology
Granular physical risk data is matched with data on locations, sectors, and financial exposure from client.
Each sector (NACE level 1 and 2) has a sensitivity to each hazard on a scale of 1-5 – for example, sensitivity of Agriculture to Water
Stress.
Hazard at location is multiplied by sensitivity of the economic activity to the hazard to give a risk score. For example, if Water Stress at
the location is a 4 (‘High’) and sensitivity of Agriculture to Water Stress is 5 (‘Extremely High’), Risk Score is 20 (‘Extremely High’).
Results are presented at a portfolio, sector, province, and loan level. CRS also provides all the data behind the analysis on a loan-level.

7. Climate Risk Services page
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Physical climate risk: top-down Portfolio Scan

8. Physical Risk - methodology
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Source: CRS Methodology
Short-term
2011 - 2040
Mid-term
2041-2070
Long-term
2071-2100
Baseline
1981 - 2010
• Analysis uses 10 hazards (soon 12!)
• Hazard models from leading scientific institutions
(World Resources Institute, Copernicus, UK
Hadley Met Office etc.)
• Analysis is done on the short (2011-2040),
medium (2041-2070), and long-term (2071-2100)
• Analysis uses high emissions scenario (IPCC
RCP 8.5)
• CRS models provided at 50 km x 50 km
resolution; can be used for creating province and
country scores. 1 km x 1 km resolution flooding
hazards will be available in January 2024.
Short-term
2011 - 2040
Mid-term
2041-2070
Long-term
2071-2100
Baseline
1981 - 2010

9. Physical Risk – Sample Portfolio Data
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Source: CRS Methodology
The CRS climate risk tool is built with minimal data
collection requirements in mind.
We require data on:
• Asset Name – e.g. loan id
• Location – this can be lat-long (if available) or
address. If neither is known, we can work with
Province level, or country level
• Sector code – we work with NACE 1 and
NACE 2 codes. Other sector classification
methods (like NAICS or ISIC) can be mapped
to NACE
• Exposure amount – this is usually the net
amount that is at risk
Sample data collection template

10. Physical Risk – Executive summary
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Source: CRS Methodology
Once the data is uploaded to our platform, we
generate different insights.
We start with an Executive Summary. This
shows:
 % of total loan portfolio at risk
 Four periods up to 2100
 Aggregate across all hazards: if one out of
10 hazard scores is “very high”, then
the loan or asset scores very high
 This is in line with best practice

11. Physical Risk – Critical Hazards
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Source: CRS Methodology
We provide an overview of the main hazards:
what % of assets/loans is most at risk from
which hazards?
We also provide an overview of the main
locations at risk: which locations contribute the
most risk in the portfolio?
Also included is an overview of the main
sectors at risk. Users can set minimum
thresholds: for example, show all sectors with
> 5% high risk or extremely high risk.
And finally, an overview of the different
combinations of hazard, sectors, and locations
to identify key risk concentrations and set
materiality thresholds.

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Physical climate risk: top-down Portfolio Scan
Geolocation (lat-long/address)
High
• The highest data score is when banks have data of asset
locations of their clients. Some banks are now requesting this
data during DD or the annual review
Province (GADM)
Medium
• A good proxy is understanding whether the company is mostly
active in a certain province. A common pitfall is that the location
of head office does not always match its assets locations
Country
Low
• If no data on asset locations or province exists, then using a
country as a proxy can still be informative

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Physical climate risk: top-down Portfolio Scan

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Portfolio Findings
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The executive summary shows the locations of assets and the value of the portfolio in each risk
category across time periods.

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Climate Risk – Summary
The tables show the key hazards and the countries
and sectors at risk in the portfolio.
Each asset is assigned a risk category according to
the highest risk score from the 10 hazards analysed.
All percentages are of total value of the portfolio.
River flooding and coastal flooding are they key
hazards of concern for the portfolio. Risks are
concentrated in Canada, Australia, South Africa,
Turkey, and the United States.
Assets in the ‘real estate activities’ sector are at
greatest risk.

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Portfolio Findings – Risk Concentrations
The table shows the key ‘extremely high’ risk concentrations in the portfolio. Notably, real estate assets in Canada
are exposed to coastal flooding, constituting 16.67% of total portfolio value.

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Portfolio Findings – Risk Concentrations
The table shows the key ‘high’ risk concentrations in the portfolio.

18. Climate Risk Services
How to Read – Asset Risk Scores
What are the hazards posing a
risk to this asset?
• Identify key hazards
• See breakdown of hazard,
sensitivity, and risk scores

19. Climate Risk Services
How to Read – Asset Risk Scores
Coastal Flood
Location: 5
implies that the probability of a 0.5m flood (or more) happening any year is above 20%
Sector: 4
An acute coastal flood has the potential to cause significant disruption to all aspects of the manufacturing process, from the destruction of
machinery and product stock to disruption of supply chains and endangerment of employees.
River Flood
Location: 5
Implies that the probability of a 0.5m flood (or more) happening any year is above 20%
Sector: 4
An acute river flood has the potential to cause significant disruption to all aspects of the manufacturing process, from the destruction of
machinery and product stock to disruption of supply chains and endangerment of employees.
Heat Stress
Location: 4
Implies that the 95th percentile Universal Thermal Comfort Index (UTCI) temperature of the most extreme month of the year is a heat event
between 38-46 °C
Sector: 4
Heat stress leads to higher demand of cooling and the risk of food spoilage is increased during storage and transportation and the
processing stages so that the viability of operations is in question during heat stress periods.

20. Climate Risk Services
Asset Level Breakdown (1)
Due Diligence Next Steps (Asset level)
Coastal Flood
Site Assessment
Hire a coastal engineering specialist for site vulnerability analysis.
Infrastructure Upgrades
Implement necessary flood defenses, like elevated structures.
Emergency Plan
Develop a comprehensive flood response and business continuity
plan.
Insurance Review
Ensure adequate coverage for flood damages.
Supply Chain Resilience
Identify and mitigate flood-impacted supply chain risks
River Flood
Hydrological Survey
Engage a hydrologist for river behavior and flood risk analysis.
Flood-Resistant Construction
Adopt water-resistant construction in critical areas.
Flood Alert Systems
Install or access advanced flood warning systems.
Employee Safety Training
Conduct flood safety and evacuation drills.
Operational Backup Plans
Establish backup operations for critical processes.
Heat Stress
Cooling Systems: Ensure efficient climate control for storage and operations.
Energy Efficiency: Consult an expert to optimize energy use, reducing cooling costs.
Worker Safety Measures: Implement heat stress safety protocols and monitoring.
Enhanced Cooling Logistics: Review and strengthen cooling logistics for product transport.
Continuity Strategies: Develop plans for maintaining operations during high heat periods.

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51. THANK YOU
Climate Risk
Services