Technology & Data

Infrastructure Investors Lack Physical Climate Risk Tools

A new survey from the EDHEC Infrastructure & Private Assets Research Institute has shown that most investors think climate risk will have a highly significant impact on their infrastructure assets, but do not know how to measure or manage it. The Physical Climate Risk report stated that investors were concerned by a lack of data, and that the risks were “huge” with no certainty on how they would affect global infrastructure. Key findings from the survey – which polled 70 investment industry professionals including managers with over US$2 trillion under management – revealed significant apprehensions and knowledge gaps. More specifically: 97% of investors polled believed that physical climate risk was significant; 76% anticipated a medium or high impact of climate risk on their infrastructure investments; 76% found existing climate scenarios inadequate for assessing physical climate risk; 16% only believed there is adequate understanding of how physical climate risk can affect infrastructure assets; and 66% of respondents had not conducted any evaluation of physical climate risk themselves. “The survey confirms that despite the recognised importance of physical climate risk, investors and managers lack sufficient tools and knowledge to assess its impact on their portfolios,” said Frédéric Blanc-Brude, Director of the EDHEC Infrastructure & Private Assets Research Institute. “[There is a] critical need for better understanding and management of physical climate risk in infrastructure investments. Despite the high stakes, there is a clear gap between [its] perceived significance and the ability to evaluate and mitigate [it] effectively.” The report underscored the importance of incorporating robust risk assessment frameworks and climate scenarios into infrastructure investment strategies to address the evolving challenges posed by climate change.

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