How does UNEP FI support financial institutions in their climate risk management efforts? | Q&A with David Carlin

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© Helene Getz

Q&A with David Carlin, Head of Risk at UNEP FI


| How does UNEP FI support financial institutions in their climate risk management efforts?

UNEP FI leverages the convening power of the UN to bring peer financial institutions together with leading climate experts in order to tackle climate risk management challenges and develop good practices. These experts include tool providers, supervisors, and climate scientists who present in an interactive format to the program participants and offer the opportunity for Q&A. In addition, the program runs workshops that focus on specific elements of climate risk management including climate scenarios, physical risk data, and transition planning. Finally, in the working groups of the program, participants actively contribute to the creation of resources and tools that assist in managing climate risks. A large range of these can be found here. In addition, these resources include guides to sector-specific risks, a database of climate risk tools, methodologies for physical and transition risk assessments, and much more.

 


Explore the full set of UNEP FI Resources


 

| Amidst discussions on the accuracy of the current climate risk assessments (e.g. climate models, tipping points), what should financial institutions focus on to make sure their climate risk management approach is adequate?

Financial institutions should take a toolkit approach to climate risk management. This means not just using one set of scenarios or a single model. Firms must consider differing time horizons, different risk types, correlations between climate and other risks, and the impacts of climate-driven tail risk events. Firms should recognize that climate change may act as an amplifier of loss distributions, changing both the mean and deviation of the losses seen. As a result of greater uncertainty, firms should be proactive in assessing the risks they face and recognize that those risks may be more severe than indicated by their current models.

 


Have you already read?

Towards a robust approach for measuring business dependencies on nature | UNEP FI


 

| What should financial institutions know about nature-related risks as part of climate change tackling and portfolio decarbonisation?

Financial institutions need to reckon with nature-related risks when considering their climate and sustainability goals. Nature-related risks are both drivers of climate change and also consequences of it. When setting net-zero targets, firms must consider the impacts of those policies on nature. For example, overreliance on bioenergy may have negative consequences for biodiversity or forests, likewise scaling up the use of battery technologies may pose pollution and waste issues if circularity and safe disposal are not considered. For risk managers, nature-related risks can pose additional economic challenges beyond an initial climate event or may not yet be captured in risk models. A good example of this is the loss of ecosystem services that might result from the degradation of a marine ecosystem.

 

| Do you believe that the current economic system requires a major transformation to enable a ‚livable future‘ as the latest IPCC report states it? If yes, what changes do you find most relevant?

Yes, what is needed is an “all hands on deck approach.” We need governments, businesses, consumers, and societies all supporting sustainability. This means no longer considering short-term profit maximization at the expense of long-term value, it means acknowledging that measures such as GDP may be confusing consumption with wellbeing, and it means moving away from a make-take-waste operating system into a circular economy.

 


Further reports by UNEP:

High-level roadmap: Aligning financial flows with the Kunming-Montreal Global Biodiversity Framework

Unlocking Investment in Net Zero

Monitoring for impact in sustainable land use finance

Supporting the demonstration of positive impacts in land use finance


 

| brief bio

David Carlin leads risk programming for UNEP- Finance Initiative (UNEP FI). He has worked with over 100 financial institutions on topics of climate scenarios, climate risk assessments, and sustainability regulation. He and his team support financial actors across the world to develop best practices for managing environmental risks and identifying environmental opportunities.

He currently advises UNEP FI’s Task Force on Nature-related Financial Disclosures (TNFD) and the Net-Zero Banking Alliance (NZBA). He has also been a technical advisor to the Glasgow Financial Alliances for Net Zero (GFANZ).

He is the founder of Cambium Global Solutions, which helps governments, corporations, and financial institutions address the most pressing environmental challenges and thrive in a changing world.

He is also a contributor to Forbes, where he writes about climate change and leadership and a senior associate at Cambridge’s Institute for Sustainability Leadership (CISL)

David has worked as a Principal in Finance, Risk, and Public Policy for Oliver Wyman and in Model Risk Management for PNC Bank. His background is in quantitative modeling and decision science.

He conducted research in financial decision-making at Carnegie Mellon University and graduated Phi Beta Kappa from Williams College.

UNEP Finance Initiative brings together a large network of banks, insurers and investors that collectively catalyses action across the financial system to deliver more sustainable global economies.

 


All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.