Climate Risk Podcast

When it comes to setting out the financial system's response to climate change and the related risks, it is clear that financial regulation will have a key role to play.

Over the past year, we've seen supervisors setting out their expectations for climate risk management, with a number undertaking stress testing or scenario analysis exercises. More authorities are implementing mandatory Climate-Related Financial Disclosures, and the NGFS continues to grow, with now over 80 members. The recognition of climate change as a source of systemic risk means that this flurry of activity is set to continue this year.

That's why this episode will be focusing on what the appropriate role of financial services is in tackling climate change, as well as the best way to test firms' resilience to these risks. We'll also discuss how climate risks should be balanced alongside broader ESG risks and some of the key hurdles that will need to be overcome in the years ahead.

This episode covers:

• How financial regulators are responding to climate risk
• Stress testing and scenario analysis – how and when these tools should be deployed
• Some of the current limitations around data
• Looking beyond climate change to broader environmental issues

If you have any questions, thoughts or feedback regarding this podcast series, we would love to hear from you. Please email us at: [email protected]

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Arthur Yuen – Deputy Chief Executive at the HKMA

Arthur Yuen is in charge of the full range of banking policy, supervision, conduct, and enforcement issues at the HKMA. He joined the HKMA in 1996 as Head of Administration and has since taken up different responsibilities including research and liaison on China economic and market development issues before being appointed Head of Banking Supervision in 2000. He took up the position as Executive Director (Banking Development) in July 2004, Executive Director (Banking Supervision) in June 2005 and Executive Director (External) in July 2008. He was appointed to his present position on 1 January 2010.

The physical effects of climate change - rising global sea levels and temperature, to extreme weather events - are creating or exacerbating numerous risks.

Whilst physical risks are generating a significant amount of uncertainty for business and finance, the most direct impact of physical risk is the damage of physical assets and disruption to their use. Understanding and evaluating these risks is clearly very important, but it can become challenging as the scale of the assessment increases to the total assets held by a firm or within a portfolio.

That's why this episode will be focusing on how the risks to physical assets can be assessed at scale and how to navigate the uncertainty inherent with this type of modelling. We will also discuss how mapping out supply chains, core infrastructure, and their interdependencies, can reveal vulnerabilities, as well as opportunities for collaborative adaptation.

By listening to today's episode, you will learn about:

• The impacts of physical risk at the asset level
• The key inputs and outputs used when conducting a physical risk assessment
• The secondary impacts of physical risk on supply chains and core infrastructure
• How physical risk data can be used to facilitate collaborative adaptation efforts

If you have any questions, thoughts or feedback regarding this podcast series, we would love to hear from you. Please email us at: [email protected]

Links from today's discussion:

XDI Cross Dependency Initiative - https://xdi.systems/

GARP's Climate Resources Hub – https://climate.garp.org/

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Rohan Hamden – Founder and CEO at XDI: Cross Dependency Initiative

Rohan Hamden is the founder and CEO of XDI: Cross Dependency Initiative, an international data and analytics organisation specialising in the modelling and analysis of asset level physical climate risk.

Rohan began his career as a fire fighter before working in the Australia government for nearly 15 years. During that time Rohan held a number of sustainability and climate related roles, culminating in the directorship of the Climate Adaptation Program for South Australia where he designed and led the implementation of the States multi-award-winning climate change adaptation program.

Rohan has advised various state and national governments on their climate adaptation programs in Australia, Canada, USA and the UK, and in 2017 he co-founded XDI with a vision of mainstreaming climate information into infrastructure and financial decision making.

In this latest instalment of the Climate Risk Podcast, we will be looking back at the past year of podcasts and considering the key learnings for risk professionals. This episode will also reflect on the progress that has been made in advancing climate risk management during 2020, and a look ahead to what's on the horizon in 2021.

Today's episode covers:

• Key lessons for risk professionals from the 2020 Climate Risk Podcast series
• Important trends risk professionals should be aware of
• Movements in financial regulation
• The impact of COVID on the climate agenda
• A look ahead to 2021

If you have any questions, thoughts or feedback regarding this podcast series, we would love to hear from you. Please email us at: [email protected]

Links from today's discussion:

GARP's Climate Resources Hub – https://climate.garp.org/

GARP - Global Survey of Climate Risk Management at Financial Firms -

NGFS – Occasional Papers

CFTC Report - Managing Climate Risk in the U.S. Financial System

Dr Maxine Nelson – Senior Vice President, GARP Risk Institute

Maxine has extensive experience in risk, capital and regulation gained from a wide-ranging variety of roles, including Global Head of Wholesale Risk Analytics and Head of Capital Planning at HSBC, significantly expanding counterparty credit risk management at the UK Financial Services Authority during the last financial crisis, leading the credit risk team at KPMG London, senior credit risk consultant at Oliver Wyman, and embedding operational risk analytics globally at National Australia Bank. Maxine has a degree in mechanical engineering and a PhD characterizing how best to apply probability theory to real world problems.

In this latest instalment of the Climate Risk Podcast, we will be exploring the issue of pricing the risks from climate change.

During the course of this inaugural series of the climate risk podcast, we have explored numerous perspectives on the pressing issue of climate change. That has included hearing from the insurance sector, boards, academia and more. But to round off this first series of climate interviews we are returning to what GARP is best known for, financial risk management.

That's why in today's episode we are speaking with Bob Litterman, a celebrated risk manager who has been actively involved with climate change issues for more than a decade.

Today's episode covers:

• Understanding emissions as a negative externality and the failure to appropriately price carbon
• Aligning financial incentives with the transition to a low-carbon economy
• The CFTC's report on Managing Climate Risk in the U.S. Financial System
• The value and limitations of scenario analysis as a tool for assessing climate risk

If you have any questions, thoughts or feedback regarding this podcast series, we would love to hear from you. Please email us at: [email protected]

Links from today's discussion:

CFTC Report - Managing Climate Risk in the U.S. Financial System

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Bob Litterman – Founding Partner, Kepos Capital

Bob is Chairman of the Risk Committee and a founding partner of Kepos Capital, a New York City based investment management fund.

Prior to joining Kepos Capital in 2010, Bob enjoyed a 23-year career at Goldman Sachs, where he held roles in research, risk management, investment and thought leadership. In 1994, Bob was named a partner and became head of the firm-wide risk function.

During his tenure at Goldman, Bob researched and published a number of ground-breaking papers in asset allocation and risk management. He is the co-developer of the Black-Litterman Global Asset Allocation Model, a key tool in investment management, and has co-authored a number of influential books on Risk Management and Modern Investment Management.

In addition to his work at Kepos Capital, Bob serves on a number of boards, including the World Wildlife Fund, and as the chair of the Climate-Related Market Risk Subcommittee for the Commodity Futures Trading Commission.

Through the course of Bob's illustrious career, he has also earnt numerous accolades including entrance into Risk Magazine's Risk Management Hall of Fame and being named as GARP's Risk Manager of the Year in 2013.

In this latest installment of the Climate Risk Podcast, we will be exploring two key concepts in the transition to net zero: greening finance and financing green.

One interesting finding from GARP's 2020 Climate Risk Survey was that over the next five years financial firms expect climate-related opportunities to have a bigger impact on their strategies than climate-related risks, underlining the fact that navigating the impacts of climate change also means being alive to the opportunities being created.

That's why in today's episode we are speaking with the head of an organisation that is actively working to bring together coalitions of global experts to identify and unlock barriers to impactful green investment.

Dr Rhian-Mari Thomas OBE, CEO of the Green Finance Institute, works at the intersection of policy making and finance and will be exploring some of the current leading efforts to align financial flows with the need to transition to a net-zero economy.

Today's episode covers:

• The distinction between greening finance and financing green
• How we can navigate barriers to green finance
• Embedding climate and sustainability in professional education
• A look ahead to COP26

If you have any questions, thoughts or feedback regarding this podcast series, we would love to hear from you. Please email us at: [email protected]

*Please note that between the time of recording and the release of this episode, two potential green finance initiatives discussed towards the end of the interview have now been formally announced. The first is that on the 9th November 2020, the UK Government announced that the first UK sovereign green bonds will be issued during 2021. The second was the Government's announcement that a UK Infrastructure Bank will be established to aid the UK's response to the COVID 19 pandemic and transition to a net-zero economy by 2050.

Links from today's discussion:

GFI Report - Accelerating green finance: Green Finance Taskforce report

GFI Report - Financing energy efficient buildings: the path to retrofit at scale

Ceres Report - Financing a Net-Zero Economy: Measuring and Addressing Climate Risk for Banks

GARP Survey - Second Annual Global Survey of Climate Risk Management at Financial Firms

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Dr. Rhian-Mari Thomas OBE – Chief Executive Officer at Green Finance Institute

Rhian-Mari began her banking career at Barclays Investment Bank in 2000, spending 10 years in leveraged finance and financial sponsors coverage before holding a succession of leadership roles across Barclays Corporate Bank and Barclaycard.

Rhian-Mari's time at Barclays culminated in the role of Global Head of Green Banking, during which time she was responsible for founding and chairing the Barclays Green Banking Council, a body that developed and launched Barclays' suite of green finance products and services.

In 2019, Rhian-Mari was awarded an OBE for services to green banking and was appointed chief executive of the Green Finance Institute.

In addition to this role, Rhian-Mari is also an Emeritus Member of the Taskforce on Climate-Related Financial Disclosures (TCFD), a commissioner for the Commission for Carbon Charging and an Advisor to the UK Government's Climate Finance Accelerator programme.

In this latest instalment of the Climate Risk Podcast, we will be taking a closer look at the financial risks associated with energy and water systems, and how these could change as the impacts of climate change increase.

In this series we have stressed the importance of risk professionals building up a holistic view of climate risk. This requires better understanding the complex and interconnected nature of key systems in the climate, economy and society.

Two of the most fundamental factors at play in our global system are undoubtedly energy and water, systems that are themselves highly interconnected. That's why in today's episode, you will hear from Michael Webber, one of the world's leading thinkers on the subject of water, energy, and the risks generated by these complex systems. This discussion will cover:

• The interconnected systems of energy and water, and how these are being impacted by climate change
• How to navigate the financial risk of these impacts
• How to move forward - the role of technology, data and disclosures
• Key trade-offs and unintended consequences of action

If you have any questions, thoughts or feedback regarding this podcast series, we would love to hear from you. Please email us at: [email protected]

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Michael Webber – Chief Science and Technology Officer at ENGIE & Josey Centennial Professor in Energy Resources at the University of Texas at Austin

Michael's expertise spans research and education at the convergence of engineering, policy, and commercialization on topics related to innovation, energy, and the environment.

In addition to authoring more than 400 publications and serving on the advisory board for Scientific American, Michael has published two insightful books on the topic of energy. 2016's Thirst for Power addresses the connections between earth's most valuable resources and offers an approach toward a sustainable future. 2019's Power Trip is also packed full of insights as we attempt to resolve the tension that exists between our growing demand for energy and its impact on the planet.

The systemic and existential nature of the risks arising from climate change requires us to engage with the problem strategically at a high level. But how can we do this when the problem is so vast and complex?

One approach is the application of systems theory to our planet in a discipline known as earth system science. This approach treats the whole globe as a single complex system, observing the interactions of sub-systems such as our atmosphere and biosphere, as well as the feedback loops that act to stabilise or destabilise the fundamental conditions for life.

This approach has already unlocked a number of key insights for understanding the causes and impacts of climate change and is a vitally important perspective for anyone wanting to better understand complex and interconnected nature of the risks from climate change.

During this episode, you will hear from Tim Lenton, a leading academic in the field of earth system science and co-author of the seminal and award-winning paper on climatic tipping points and the non-linearity of climate change (https://www.pnas.org/content/105/6/1786).

In addition to discussing systems theory and a number of critical climatic tipping points, Tim also provides insights into the various emissions pathways that lie ahead of us and shines a light on some of the often underappreciated social impacts of climate change such as near term mass migration.

If you have any questions, thoughts or feedback regarding this podcast series, we would love to hear from you. Please email us at: [email protected]

Tim Lenton is Director of the Global Systems Institute and Chair in Climate Change and Earth System Science at the University of Exeter.

Tim has over 20 years of research experience in studying the Earth as a system and developing and using models to understand its behaviour.

He has achieved many accolades, including the Times Higher Education Award for Research Project of the Year 2008 and the Royal Society Wolfson Research Merit Award, 2013.

He is a Turing Fellow and a Fellow of the Linnean Society, the Geological Society and the Society of Biology.

Consumer sentiment is a critical part of climate transition risk. As consumers become increasingly aware of the impact goods and services are having on the planet, we will start to see profound shifts in demand.

Join us today as we hear from James Hand, Co-founder of the social enterprise GIKI, an organisation that is creating apps and data tools to inform the public about the impact of their consumption and drive greater transparency in the real economy.

James also reflects on the current state of ESG and how we can make ESG data more useful for driving decision making.

• Giki Badges: An app to help you find sustainable and healthy products in the UK supermarket - https://badges.giki.earth/
• Giki Zero: Your free personal guide to understand, track and lighten your footprint on the planet - https://zero.giki.earth/

If you have any questions, thoughts or feedback regarding this podcast series, we would love to hear from you. Please email us at: [email protected]

James Hand – Co-Founder and Data Scientist, Giki

James Hand is a co-founder of the social enterprise Giki.

Giki's mission is to help people live more sustainably. Amongst their various initiatives, Giki has developed Giki Zero, a step by step sustainable life guide, as well as Giki Badges, an app to help people in the UK find sustainable food and products.

Before founding Giki, James has had a career in asset management, including roles as Co-Chief Investment Officer at Investec Asset Management (now Ninety One), and co-founder of the innovative 4Factor equity team. James has also been a longstanding advocate of embedding environmental, social and governance issues – often referred to as ESG - in investment decisions.

With expertise in data analysis, behavioural finance and company research, James is perfectly poised to talk to us about the challenges of creating readily available and digestible information to help consumers navigate the complex world of sustainability.

What are some of the limitations of the current disclosure frameworks for use by risk managers, and how can we tell when companies are saying one thing but doing another?

In recent months we have seen climate risk disclosure frameworks, such as the one set out by the Task Force on Climate-related Financial Disclosures (TCFD), increasing in popularity. And whilst these developments are to be welcomed, current recommendations fall short of capturing a complete picture of a firm's activities.

From a risk management perspective, that can be problematic.

The omission of certain reporting categories, such as an organisation's voting record or lobbying activities, opens up the potential for firms to greenwash, introducing additional risks and undermining efforts to reach net zero.

That is why in today's episode we are in conversation with Dylan Tanner, Co-founder and Executive Director of Influence Map, a UK based non-profit working to shine a light on corporate lobbying activities and voting records.

Find out how the work at Influence Map is helping to drive climate action by increasing transparency and accountability across firms in the financial sector and real economy.

• Influence Map's Website: https://influencemap.org/index.html

If you have any questions, thoughts or feedback regarding this podcast series, we would love to hear from you. Please email us at: [email protected]

As well as having overall responsibility for InfluenceMap's operations globally, Dylan manages the FinanceMap platform. Prior to co-founding InfluenceMap, Dylan established a market-leading environmental consultancy in Tokyo which is now ERM Japan. Dylan grew and led a 50-person team engaging in a wide variety of corporate and technical advisory work in Japan and Asia covering environmental audits, land remediation, corporate sustainability and climate strategies.

Dylan grew up in Japan and is currently living in London. He holds a MSc in Environmental Technology from Imperial College and a PhD in Theoretical Physics and Mathematics from Kings College London. Dylan has an Erdős–Bacon number of 8.

Originally released on the GARP Risk Podcast on July 16, 2020.

In this episode of the Climate Risk Podcast series, we are moving beyond financial services to look at how climate change will affect firms in the real economy. We will be joined by Julie Baddeley, one of the UK's most experienced women directors, who will be sharing insights on this topic from the perspective of the Board.

Julie is also one of the founders of Chapter Zero, a fast-growing network for Chairs, Committee Chairs and Non-Executive Directors. Chapter Zero has been established to provide support, education and tools to this important group on the matters of climate change and the associated risks and opportunities. Links to find out more about Chapter Zero, as well as some of there useful educational tools, can be found below.

Links from today's discussion

• Chapter Zero's Website: https://www.chapterzero.org.uk/
• Chapter Zero's Toolkit for Boards: https://www.chapterzero.org.uk/toolkit/
• Chapter Zero's Change Management Toolkit: https://www.chapterzero.org.uk/change-management/
• GARP's 2020 Survey of Climate Risk Management at Financial Firms: https://climate.garp.org/insight/second-annual-global-survey-of-climate-risk-management-at-financial-firms/

If you have any questions, thoughts or feedback regarding this podcast series, we would love to hear from you. Please email us at: [email protected]

Julie Baddeley is one of the UK's most experienced women directors having served in an executive and non-executive capacity on the boards of leading companies in the FTSE 100 and 250 indices, as well as major public sector organisations.

In 2001 she moved to a portfolio career and has served as a director across a range of sectors including consumer, retail, financial services, professional services and global industrial. She was chairman of global recruitment company Harvey Nash plc until its sale in 2018. At the Said Business School, Julie coached top business teams from around the world on the execution of business strategy, having previously been the partner in charge of Accenture's change management practice in Europe. She was Executive Director at Woolwich plc responsible for HR, IT and the insurance businesses. Julie is active in raising the awareness of boards of UK quoted companies on the impact of climate change on their business models and balance sheets, and the impact they are having on the global climate. She is Director of the Hughes Hall Centre for Climate Change Engagement, which aims to bring Cambridge University thinking on climate science, law, regulation, risk and communication into the boardroom.