Australia’s upcoming mandatory reporting requirements highlight the need for organisations to identify, manage and disclose climate change risks, giving investors and stakeholders confidence in strategies that are resilient to uncertain climate futures.
By developing a detailed understanding of climate-related risks, organisations can make informed decisions to safeguard their operations and provide climate-related disclosures with confidence.
Through our experience delivering climate risk and adaptation plans for hundreds of clients globally across nearly all asset types, we have identified three hot tips for maximising value and success in climate risk assessments and adaptation planning:
1. Leveraging your data for customised assessment
Broad exposure assessments are a dime a dozen and don’t offer valuable insights. Your organisation is unique, and your data can tell an important resilience story. If you want to go beyond ticking a box, a customised assessment of climate risk will leverage internal datasets to better determine sensitivity to climate change impacts. Although quality is critical, data from asset management and other systems can be leveraged to identify potential vulnerabilities to key hazards. Beyond just physical location and asset type information, data that can and should build deeper context includes:
- Asset age, quality and replacement cost
- Audits, studies and assessment of asset condition
- Network criticality and importance
- Insurance claim history
- Asset revenue and organisational objectives
Maximising the value of organisational data supports a customised assessment that can align with existing asset management approaches, supporting improved operational uptake and adaptation planning that speaks the language of your team.
2. Engage key stakeholders
On-ground stakeholders understand operations and intricacies of assets, and therefore play a crucial role in climate sensitivity and adaptation planning. By leveraging their knowledge, you can develop more informed risk assessments that maximise data value and buy-in. Engaging with potential implementation teams will help develop strategies that both mitigate risks and align with broader goals and priorities, normalising the consideration of climate risk in operations and supporting improved buy-in and commitment to better climate risk management.
3. Keep it integrated
Although standards and frameworks exist, the guidebook to operationalising climate risk is yet to be written. It is therefore critical to consider how climate risk assessment outcomes can be integrated into existing risk processes. We recommend:
- Align with established risk processes: Employ the organisational Enterprise Risk Management (ERM) framework to evaluate risks in line with the existing approach. If possible, nest risks in part-child relationships to build the evidence base for enterprise level disclosures.
- Call a spade a spade: Use existing asset, organisational and process naming conventions to maximise stakeholder understanding and opportunities for integration into the asset management system.
- Understand the system: Map out procurement and capital expenditure processes to identify key opportunities for interventions and risk pinch points.
Case Study:
TAFE NSW: Industry leading climate risk management
In the face of changing mandatory climate risk disclosure requirements, TAFE NSW sought to identify critical risk areas across its portfolio of 168 campuses, and devise adaptation strategies for its infrastructure and operations. Arcadis developed a comprehensive climate change risk assessment and strategic roadmap to enhance TAFE NSW’s climate risk maturity while offering a practical, integrated approach to understanding risk and planning for resilience.
Our approach leveraged extensive asset management system data to identify climate-related risks to campus infrastructure and service delivery, with validation of the outputs undertaken by regional portfolio and risk managers. Using our Risk and Adaptation Platform (RAAP), we employed TAFE NSW’s Enterprise Risk Management framework and asset management hierarchy to assess campus risk portfolio risk and facilitate risk treatment decision making. The RAAP supports rapid and consolidated risk and adaptation assessments across diverse assets. The platform centralises climate, asset, and risk data, generating campus-specific and regional-level insights for reporting and decision-making.
In addition to the portfolio assessment, Arcadis also engaged broadly, undertaking an enterprise-level risk assessment across both physical and transition risks and opportunities to identify focus areas to maintain resilience and inform disclosures.
This project provided TAFE NSW with a comprehensive climate risk profile, and a clear resilience roadmap for its infrastructure, operations and strategic direction to manage climate risk and meet regulatory commitments.
Detailed and comprehensive climate risk assessments are essential for ensuring that organisations can disclose with confidence and remain resilient to future climate shocks and stresses. Inaction is no longer an option. Through leveraging existing data & expertise, and focusing on integration opportunities, organisations can position themselves for resilience and long-term success in an increasingly uncertain climate.
