Addressing Physical Climate Risks in Infrastructure Investment
Current investment into resilience is comparatively low due to a lack of analytical tools to quantify the exposure of a ‘real asset’ to physical climate risks (“PCRs”); the difficulty in determining and comparing resilience options: and the fact that investors don’t currently adjust their expected returns or cost of capital to account for such risks.
This situation, de facto, corresponds to a market failure.
This paper focuses on the need to incorporate physical climate risks in infrastructure design and investment decision-making. It presents how the Coalition for Climate Resilient Investment (CCRI) is addressing the ‘climate resilience market failure’ through the implementation of tools, methodologies and principles to help the various stakeholders involved in infrastructure, including the financial industry, build resilience to a changing climate.