A new climate risk taxonomy was released recently in London. It is the first framework of its kind to classify the risks of climate change. Created by the Centre for Climate Finance & Investment (CCFI) at the Imperial College Business School, the taxonomy will enable lenders, investors, and regulators to assess the climate and natural capital risks that may affect their organization.
The new climate risk taxonomy is credited as the first attempt to codify natural capital risks into an organized taxonomy. It is also the first to capture a broad range of physical and transitional climate risks affecting an enterprise's financial profile.
The taxonomy is intended to help stakeholders identify climate risks before they affect asset utilization, cause stranded assets, reduce income and margins, or other financial measures. It is envisioned to supplement traditional financial analysis. At the same time, the taxonomy should be considered integral, as the financial impacts of climate change become more evident and increasingly systemic.
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