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UW Climate Risk Lab

The UW Climate Risk Lab (CRL) is a multidisciplinary research and innovation center based at the University of Washington Foster School of Business in the Department of Finance & Business Economics. Established in 2022, it advances data and technology solutions to issues in climate-related financial risk for corporate and government decision-makers. Phillip Bruner, co-founder of the CRL, currently serves as its Executive Director.

The CRL brings together academics and professionals in climate finance, risk management, business analytics, data engineering, computer science, atmospheric sciences, supply chains management, information systems and AI. It collaborates with several initiatives within the University of Washington (UW), which include the Buerk Center for Entrepreneurship, Clean Energy Institute, Creative Destruction Lab, eSciences Institute and Urban Infrastructure Lab. Its external partners include: the Duke Energy Data Analytics Lab, the Pacific Northwest Mission Accelerator Center, and Washington Maritime Blue.

History

The CRL originated in 2022 with a grant from the Office of UW President Ana Marie Cauce made to the Foster School of Business, Department of Finance & Business Economics. The idea was then developed by a team lead by Phillip Bruner, UW Professor of Sustainable Finance, Charlie Donovan, Senior Economic Advisor at Impax Asset Management, Sam Shugart, New Product & Services Market Analyst at Puget Sound Energy and Simon Park, Harvard graduate and Fellow of the UW Evans School of Public Policy.

Steering Committee

The CRL Steering Committee is currently made up of the following members:

Phillip Bruner, Professor of Sustainable Finance and CRL Executive Director

Léonard Boussioux, Assistant Professor of Information Systems and Operations Management

Charlie Donovan, Senior Economic Advisor at Impax Asset Management and CRL Leadership Council Chair

Emer Dooley, Artie Buerk Faculty Fellow and Site Lead at Creative Destruction Lab

Dale Durran, Professor of Atmospheric Sciences and Adjunct Professor of Applied Mathematics

Kristie Ebi, Professor of Global Health and Environmental and Occupational Health Sciences and Founder of the UW Center for Health and the Global Environment

Sara Jones, Director of the Masters of Supply Chain Management and Master of Science in Business Analytics

Dan Schwartz, Boeing-Sutter Professor of Chemical Engineering and Founding Director of the Clean Energy Institute

Jan Whittington, Associate Professor of the Department of Urban Design and Planning and Founding Director of the Urban Infrastructure Lab

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Climate-related Financial Risk

What is climate risk?

Climate risk is the potential for negative consequences for human or ecological systems from the impacts of climate change^[1].

[what is climate-related financial risk] Climate is also a risk for financial sector.

study approaches

data needed.

Common approaches to risk assessment and risk management strategies based on natural hazards have been applied to climate change impacts although there are distinct differences.

The Intergovernmental Panel on Climate Change (IPCC) assessment framework is based on the understanding that climate risk emerges from the interaction of three risk factors: hazards, vulnerability and exposure. The IPCC summarizes published research on climate risk evaluations. ^[2] International and research communities have been working on various approaches to climate risk management including climate risk insurance.

What is climate-related financial risk?

Climate change is a medium- to long-term trend that is expected to have significant financial impacts on companies in affected industries, including on their credit profiles and/or share prices. However, this knowledge is not particularly helpful for lenders, investors, or regulators unless these climate-related financial risks can be further defined in terms of their scope and, more importantly, their timing and likelihood. It is necessary to identify climate risks to industries before they cause reductions in asset utilization or valuation, reduced income and margins, or other financial impacts—changes that translate into credit risk and influence lenders’ decisions about financial profiles. ^[3]

There are two categories of climate-related financial risk, according to the Taskforce on Climate-Related Financial Disclosures (TCFD): ^[4]

Transition Risks: Risks related to the transition to a lower-carbon economy. [Read more]
Physical Risks: Risks related to the physical impacts of climate change. [Read more]

Source: Recommendations of the Task Force on Climate-related Financial Disclosures

Data

The risk of climate change impacts results from dynamic interactions among climate-related hazards, the exposure and vulnerability of affected human and ecological systems, and also responses (see section 1.2.1 of IPCC AR6 WG2^[5]), as illustrated by Figure 2.

The data required for climate risk assessment is therefore organized into three key areas: climate hazard, exposure, and vulnerability, for the two types of climate risks below:

Source: IPCC AR6 WG2

References

↑ IPCC, 2022: Annex II: Glossary [Möller, V., R. van Diemen, J.B.R. Matthews, C. Méndez, S. Semenov, J.S. Fuglestvedt, A. Reisinger (eds.)]. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O.Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 2897–2930, doi:10.1017/9781009325844.029.
↑ About — IPCC". Retrieved 2023-11-16.
↑ Imperial College Business School Center for Climate Finance & Investment (February 2022). “What is Climate Risk? A Field Guide for Investors, Lenders, and Regulators.” Available at: https://imperialcollegelondon.app.box.com/s/te5eahz3x47q93vufwwu3ntmf5rxecxs
↑ Taskforce on Climate-Related Financial Disclosures (June 2017). “Recommendations of the Taskforce on Climate-related Financial Disclosures: Final Report.” Available at: https://assets.bbhub.io/company/sites/60/2021/10/FINAL-2017-TCFD-Report.pdf
↑ Figure 1.5 in Ara Begum, R., R. Lempert, E. Ali, T.A. Benjaminsen, T. Bernauer, W. Cramer, X. Cui, K. Mach, G. Nagy, N.C. Stenseth, R. Sukumar, and P. Wester, 2022: Point of Departure and Key Concepts. In: Climate Change 2022: Impacts, Adaptation, and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 121-196, doi:10.1017/9781009325844.003.

[1] IPCC, 2022: Annex II: Glossary [Möller, V., R. van Diemen, J.B.R. Matthews, C. Méndez, S. Semenov, J.S. Fuglestvedt, A. Reisinger (eds.)]. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O.Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 2897–2930, doi:10.1017/9781009325844.029.

[2] About — IPCC". Retrieved 2023-11-16.

[3] Imperial College Business School Center for Climate Finance & Investment (February 2022). “What is Climate Risk? A Field Guide for Investors, Lenders, and Regulators.” Available at: https://imperialcollegelondon.app.box.com/s/te5eahz3x47q93vufwwu3ntmf5rxecxs

[4] Taskforce on Climate-Related Financial Disclosures (June 2017). “Recommendations of the Taskforce on Climate-related Financial Disclosures: Final Report.” Available at: https://assets.bbhub.io/company/sites/60/2021/10/FINAL-2017-TCFD-Report.pdf

[5] Figure 1.5 in Ara Begum, R., R. Lempert, E. Ali, T.A. Benjaminsen, T. Bernauer, W. Cramer, X. Cui, K. Mach, G. Nagy, N.C. Stenseth, R. Sukumar, and P. Wester, 2022: Point of Departure and Key Concepts. In: Climate Change 2022: Impacts, Adaptation, and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 121-196, doi:10.1017/9781009325844.003.

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