Climate Risk Taxonomies 101: A User Guide

Hear from Bob Buhr of the Imperial College Business School, as we explore ways of organizing the risks from climate change.

A risk taxonomy is a key underpinning of enterprise risk management. Used by firms to create a common risk language, it underpins a range of activities, such as risk identification, risk appetite setting and risk horizon scanning. But when it comes to the risks arising from climate change, there has been a bit of a vacuum. Some firms have chosen to use ‘green’ taxonomies. But these were set up for a different purpose – that is to classify the sectoral investment opportunities from the transition to a net zero or ‘green’ economy.

That’s why in today’s episode, we’ll be looking at how firms can overcome this gap, by examining a taxonomy that has been set up specifically to classify potential firm-specific climate risks. We’ll explore:

• The challenges facing firms from a lack of suitable risk taxonomies;
• What the key categories within a climate risk taxonomy ought to be; and
• Why and how biodiversity loss and natural capital risks should be incorporated.

To find out more about the Sustainability and Climate Risk (SCR®) Certificate, follow this link: https://www.garp.org/scr

For more information on climate risk, visit GARP’s Global Sustainability and Climate Risk Resource Center: https://www.garp.org/sustainability-climate

If you have any questions, thoughts, or feedback regarding this podcast series, we would love to hear from you at: climateriskpodcast@garp.com Links from today’s discussion:

• Bob’s latest book, “Climate Risks: An Investor's Field Guide to Identification and Assessment” - https://www.wiley.com/en-gb/Climate+Risks%3A+An+Investor%27s+Field+Guide+to+Identification+and+Assessment-p-9781394187355
• Eila Kreivi on the GARP Climate Risk Podcast – https://www.garp.org/podcast/eu-taxonomy-sustainable-finances-cr-220616
• UNEP FI’s annual climate adaptation gap reports – https://www.unep.org/resources/adaptation-gap-report-2022
• Jo Handelsman on the GARP Climate Risk Podcast – https://www.garp.org/podcast/soil-crisis-opportunity-cr-041323
• McKinsey’s report on natural capital - https://www.mckinsey.com/capabilities/sustainability/our-insights/nature-in-the-balance-what-companies-can-do-to-restore-natural-capital

Bob Buhr, Honorary Research Fellow, Centre for Climate Finance and Investment, Imperial College Business School

Over a 30-year career, Bob has worked at major rating agencies, asset managers, hedge funds and banks, and was often cited as a top-ranked bond analyst in various investor polls. He has published ESG and climate-related reports and written on environmental risks for years and has engaged with a variety of NGOs on climate and natural capital-related issues. He is the author of Climate Risks: An Investor's Field Guide to Identification and Assessment. Bob holds a bachelor’s degree from Ithaca College, and a Ph.D. from Brown University.