New initiative analyses climate resilience of thousands of firms

Owen Grafham tells Real Economy Progress about a new open-source platform assessing the corporate response to physical risks

London Climate Action Week attendees are bracing themselves for heatwaves in the capital over the coming days, with weather warnings in place and temperatures predicted to rise to 37 degrees on Wednesday.  

It’s perhaps fitting, then, that on the event’s opening day, a new initiative has been launched to assess the climate resilience of thousands of companies.  

Non-profit Arc will today unveil a prototype of its newest venture, ResilienceArc, to help businesses understand their exposure to physical climate risk, and the quality of their responses. 

“Decision makers at corporates, governments and financial institutions are currently faced with an incredibly fragmented data system when it comes to physical climate risks,” says programme lead Owen Grafham.  

“The information is all over the place, the methodologies are inconsistent, and there’s a very unclear picture of what good corporate responses are meant to look like.”

A new survey by Climate Proof and Theia Finance Labs finds that 40% of industry participants expect physical climate risks to increase the cost of business, and most think they will trigger asset repricing – echoing a recent warning from the UK’s Climate Change Committee about the havoc such risks could wreak on financial markets.  

ResilienceArc has used a mixture of third-party data and corporate disclosures to map the vulnerability of more than 3,000 firms’ assets to potential events like flooding, droughts and heat waves. 

It conducted a more thorough assessment of around 200 of those entities, covering how they monitor their risks and impacts, set targets, and integrate resilience into strategies and operations. 

The assessment also considers capital expenditure patterns, the provision of goods and services that help tackle external physical risks, supply-chain exposure and the governance of climate resilience.  

“The overall scores are generally low at the moment,” Grafham tells Real Economy Progress – although he notes that this could be influenced by low transparency levels, as well as general unpreparedness.  

Only five companies have set time-bound targets for physical climate risks: Berkshire Hathway, China Shenhua Energy, Constellation Energy, Marathon Petroleum and Naturgy Energy. 

Anglo American has the highest overall score for now, but no firm is considered fully ‘resilience aligned’. 

“But if you look under the hood, and explore the analysis at a submetric level, encouraging signals appear,” says Grafham. 

“All companies assessed are doing something, somewhere,” he observes, “with front-runners starting to emerge in different areas”.

Businesses recently gave their feedback on the EU’s Framework for Climate Resilience, which is due to be released later this year. 

Among the responses were requests for more incentives for firms investing in climate adaptation – including favourable treatment under public procurement rules – and more public-private financing models.

ResilienceArc says regulators can use its data to better understand what interventions might be needed, and Grafham is encouraging companies and other stakeholders to engage with the prototype.   

“This is the first time, we believe, that a corporate can really look at a data-driven framework and say ‘this is what we need to start doing in order to be better on resilience’,” he says.