Business risk and the emergence of climate analytics

Abstract

Emerging awareness of climate-related financial risk has prompted efforts to integrate knowledge of climate change risks into financial decision-making and disclosures. Assessment of future climate risk requires knowledge of how the climate will change on time and spatial scales that vary between business entities. The rules by which climate science can be used appropriately to inform assessments of how climate change will impact financial risk have not yet been developed. In this Perspective, we summarize the demands by the business and finance community for reliable climate information, and the potential and limitations of such information in the context of what climate models can and cannot currently provide. Assessing future climate-related financial risk requires knowledge of how the climate will change at various spatial and temporal scales. This Perspective examines the demand for climate information from business and finance communities, and the extent to which climate models can meet these demands.