New Management Instruments to Reduce Climate Risks for the Public and Private Sector

The Paris Agreement addresses the physical impacts of climate change, such as extreme weather events, in a separate article and mentions climate risk insurance as a respective measure for companies and states. However, risk transfer through insurance is insufficient. Companies must take risk prevention measures too. The question arises how climate-related risk management should be designed and where it should be integrated (e.g. risk management, sustainability management). If companies in the real economy suffer financial losses or become illiquid due to the climate crisis, their capital providers will be affected as well. Consequently, impacts of the climate crisis could influence the financial markets as well. This risk can be reduced if banks and investors consider climate risks systematically.

In this project, the consortium acts on the above described scenario and aims to pave the way towards the development of adequate measures and instruments to reduce climate risks for the private and public sector. Within the scope of the project, the consortium analyses and addresses the following topics:

• Climate risk insurance and applicability to Germany;
• Corporate reporting and management systems on physical climate risks;
• Systematic consideration of physical climate risks in the financial sector.

Due to its expertise, Frankfurt School focuses on the project component of the assessment of climate risks in the financial sector. The output of the Project are the publication of (scientific) reports and articles, the formulation of policy recommendations and the organization of workshops with relevant stakeholders, including banks, companies and institutional investors.