Making climate metrics decision-ready

Physical climate risk data: the more we learn, the less we know? Khalid Azizuddin's recent piece in *Responsible Investor captures well what many practitioners are grappling with today: - asset-level data that remain incomplete or hard to interpret; - physical hazard exposure often disconnected from financial materiality; - little visibility on supply chains or customers; - adaptation and resilience efforts largely ignored; - and a risk of over-simplifying complex realities into a single “score.” Some three years ago, EDHEC Business School set out to address exactly these challenges, working to advance climate risk modelling and make decision-useful for investors, companies, and public authorities. In this work, we have developed: 🔹 a blueprint for a new generation of probabilistic climate scenarios; 🔹 high-resolution geospatial modeling capabilities to allow for geographic and sectoral downscaling, consistent with each scenario; 🔹 an open database of decarbonisation and resilience technologies through the #ClimaTech project, which officially launched this week. While the research is public, the new EDHEC Climate Institute has also been assisting a school-backed venture, Scientific Climate Ratings (SCR), which integrates this research to deliver forward-looking quantification of the #financialmateriality of climate risks for infrastructure companies and investors worldwide. While SCR provides a rating scale for comparability, it avoids the trap of over-simplification. Each rating is backed by probabilistic scenario modelling, analysis of physical and transition risk exposures, and explicit accounting for adaptation measures. The result is a synthesis that remains transparent, interpretable, and anchored in scientific rigour. Together, these initiatives aim to move the discussion from data abundance to decision relevance, equipping practitioners with tools that connect climate science, finance, and strategy.

If I’m the CFO, I don’t need a sustainability report. I need a business case. That means we don’t start with targets or frameworks — we start with real questions. Where can we cut costs with lower-emissions inputs? How does energy use vary by site, and what would it take to reduce it? What’s the cost of inaction if a customer makes emissions part of vendor selection? If sustainability can help me answer those questions — we’re in business. But that only works if the data holds up. I need to know where the numbers come from, what assumptions are baked in, and what we’re doing to improve accuracy quarter over quarter. And I need it structured in a way that speaks the language of finance: capex, opex, margin, payback, risk. Not just “carbon reductions,” but “cost per unit improvement.” Not just “engaged suppliers,” but “procurement risk exposure cut by X%.” If we can get to that level of clarity, sustainability stops being a reporting obligation. It becomes a line of influence in budget decisions, product roadmaps, and investor conversations. But that alignment has to be built — not assumed. So if I’m the CFO, here’s the conversation I want to have with the sustainability lead: • What data do we have today that’s decision-ready? • Where are the gaps? • What’s the first business case we can validate together — and how do we measure it? From there, we build trust. And from trust, we build outcomes. Because when sustainability is framed in business terms — it gets funded. When it’s not — it gets delayed.

Over the past few years, financial institutions have made progress integrating climate risk into their strategies—yet one major frontier remains underdeveloped: how to value the financial benefits of resilience investments. At IFC, we’re hearing a consistent message from our client banks: “We know physical climate risks are growing. We know resilience matters. But how do we quantify the business case? How do we translate hazard analytics into metrics that matter for credit, pricing, and portfolio performance?” We aim to develop a practical, sector‑specific valuation approach that links A&R measures to clear and monetizable financial benefits—avoided losses, protected revenues, reduced OpEx, improved credit performance, and more. This aims to support lenders, insurers, and investors in scaling A&R finance in emerging markets. If you're working in this area, welcome your insights on: • Emerging methodologies for quantifying resilience benefits • Sector‑specific ROI evidence for common A&R measures • Approaches to valuing avoided losses or business interruption • Barriers FIs face when integrating A&R into credit or investment decisions • Examples where resilience investments improved financial performance Your expertise can help ensure this framework is credible and can be used by FI decisionmakers. #ClimateAdaptation #ResilienceFinance #SustainableFinance #IFC #EmergingMarkets #ClimateRisk #FinancialInstitutions William Beloe Jamie Fergusson Dr. Chiara Trabacchi Sara Shoff Lori Collins Guido Schmidt-Traub Stephane Hallegatte Jia Li

Climate Finance Paradox: Decarbonization causing more Sustainability challenges is the current state of Climate Finance. In this paper we firstly identify and formalize the Climate Finance Paradox: despite climate finance flows exceeding USD 2 trillion annually, most capital is structurally optimized for short-term, easily measurable carbon reduction rather than comprehensive sustainability (circular economy + ESG). Using theory from temporal discounting, principal–agent problems, and metric lock-in, we show why current climate finance architectures systematically underweight lifecycle impacts such as toxic waste accumulation (panels, blades, inverters, batteries etc.) critical mineral depletion, biodiversity loss, and social inequities. As a result, much of global climate finance concentrates in a “high-decarbonization, low-sustainability” zone, solving one crisis while quietly creating several serious sustainability problems. Secondly, we introduce a rigorous diagnostic and prescriptive decision architecture based on Dynamic Prescriptive Economics (DPE). The paper reduces the complexity of climate action into a two-dimensional decarbonization–lifecycle sustainability space and operationalizes it through the Regenerative Climate Finance Index (RCFI). By combining carbon performance with circularity, biodiversity, social equity, and institutional integration, each with explicit thresholds and weights - the framework prevents single (carbon) -metric optimization and enables transparent classification of projects and portfolios. This transforms climate finance evaluation from descriptive carbon reporting into a rule-based, decision-ready system capable of identifying paradoxical investments and guiding them toward regenerative outcomes. Thirdly, we show that the paradox is neither inevitable nor economically prohibitive. Through detailed scenario analysis across renewable energy, battery manufacturing, and nature-based solutions, the paper demonstrates that projects can move from the paradox zone to a regenerative ideal with modest capital premiums and often improved long-term risk-adjusted returns. By redesigning financial instruments (e.g., regenerative green bonds, blended finance, results-based payments) and embedding governance mechanisms (portfolio constraints, lifecycle accountability, community participation), the paper shows how policymakers, investors, and multilateral institutions can systematically shift climate finance toward solutions that simultaneously advance decarbonization, ecological regeneration, and social equity. @Climate Change / ESG Professionals Group

This framework gives boards a practical way to integrate climate and nature into core decision-making. The framework from the World Economic Forum, developed with Deloitte, positions climate change and nature loss as factors that directly affect growth, capital allocation, and competitiveness. Climate and nature now influence where investment flows, which technologies scale, and which business models remain viable. Sectors across energy, finance, manufacturing, food systems, and technology are already being reshaped by demand for solutions that combine performance with sustainability. The framework challenges a common boardroom pattern. Climate and nature are still often handled as risk topics or reporting requirements. That framing no longer matches how markets behave. These forces are drivers of structural change, accelerated by geopolitical shifts, artificial intelligence, and regulation that is redirecting capital toward efficiency, resilience, and innovation. What makes the framework useful is its focus on how boards already operate. Climate and nature are embedded into four familiar responsibilities: oversight and responsibility, strategy, risk and opportunity, and disclosure and transparency. The objective is not to add new layers, but to sharpen how existing ones function. A core insight is that decision quality suffers when climate and nature remain abstract ambitions. Decision quality improves when they act as filters for strategy, investment priorities, incentives, and accountability. Three enabling conditions support this shift. Board-level skills and knowledge determine whether assumptions can be challenged with confidence. Stakeholder collaboration provides early visibility into dependencies, risks, and market signals beyond the organization’s control. Culture determines whether adaptive thinking and challenge are encouraged or avoided. The framework is deliberately practical. Each principle is paired with focused questions for boards and management, designed to test alignment between ambition and execution. The emphasis is on better decisions. Boards that apply this framework rigorously will be better positioned to manage risk, attract investment, and capture value as markets continue to evolve.

🙅♀️ “Avoided emissions claims cannot be trusted.” That’s what we often hear: they’re not robust, not comparable, and therefore impossible to use seriously in financial evaluations or target setting. 🌍 This is exactly why we created Climate Dividends. An extra-financial indicator and mechanism that turns avoided emissions into standardised and verified data, making them finally usable in financial decision-making. 💰But how to objectify #Climate #Positive #Impact in #Investment #decisions and #DueDiligence? -> that’s what our new White Paper “Rethinking Climate Metrics” does, via financial use cases. 📊 Discover 3 key ratios to integrate climate performance into investment processes: 1️⃣ Climate Dividends Efficiency (CDE) measures real #climate #efficiency: CO₂e “spent” but for what impact? 2️⃣ Climate Dividends Intensity (CDI) aligns revenues with #climate #impact. 3️⃣ Climate ROI (C-ROI) compares #climate #performance across different investments. 💡With case studies (Eurazeo Team for the Planet ADEME Investissement Portzamparc Groupe BNP Paribas CVE (Changeons Notre Vision de l'Energie) ACORUS), best practices, and practical tools. 👉 Download the White Paper: link in comments! Many thanks to all those who collaborated with us for this big work Erwann Le Ligné Audrey LAMBRY Samuel Vionnet Mathieu Joubrel Guillaume Coqueret Noelia Pacharotti Jérémy Rasori Damien Didier Ronan LE MOGUEN Fabio Lancellotti Stefano Bonelli, PhD Annelyse Potié Anthonin David Clémence Lacharme Alice PÉGORIER Karine Mérère Clémentine de Butler Philippe Benquet &Yohan Rossetto Marion Henriet Mehdi Coly Denis GALHA GARCIA Arthur Auboeuf, and of course Laura Beaulier for coordinating all this brain effort!

California Climate Regulations are coming, yet guidance for companies in scope is slow to develop. FSI Consulting has put together a list of actions that companies can take today, that will prepare them for what will likely be a shortened runway for compliance. If you and your company are struggling with CA readiness and where to start, here are 5 no regret actions you can start taking towards compliance: 1- Engage with Key Stakeholders and Determine Overall Approach  Start by assembling a cross-functional team (Sustainability, Finance, Legal, Operations) to manage and support efforts. Work as a team to secure executive and Board-level buy-in while ensuring adequate resources and oversight. Investigate options to keep work in-house or engage with a consultant to calculate GHG emissions and/or prepare a climate risk report.   2- Start Compiling Climate Risk Data  Compile a list of potential physical risks (floods, fires, heat, etc.) to facilities, and research potential transition risks (carbon pricing, regulations, market changes, etc.) based on your organizational boundaries. Think about and identify internal climate risk governance activities and collect relevant metrics and targets for evaluating climate risk mitigation activities. Review peer companies’ climate risk reports in the public domain.   3- Evaluate GHG Emissions Inventory Reporting Readiness  Conduct an internal review of current GHG inventory processes (with future attestation in mind), assess data quality management systems and identify reporting gaps versus requirements.   4- Engage Third-Party Assurance Provider for GHG Emissions Inventory  Select and onboard a qualified verification body and get early feedback on data collection processes and controls.   5- Review Climate Strategy Documentation  Assess current climate commitments and targets, identify gaps in current documentation and create a clear paper trail for compliance purposes.

𝗘𝗦𝗚 𝗪𝗶𝘁𝗵𝗼𝘂𝘁 𝗠𝗲𝘁𝗿𝗶𝗰𝘀 𝗜𝘀 𝗝𝘂𝘀𝘁 𝗮 𝗦𝘁𝗼𝗿𝘆 One of the most common questions I get from companies starting their ESG journey is simple: “What exactly should we be measuring?” This is where a well-structured ESG KPI framework becomes incredibly powerful. 🤓 ♻️ Developed by the European investment and financial analyst community, this guideline was designed with one clear purpose: to make ESG decision-useful, comparable, and relevant for real business and investment decisions. It bridges a gap many of us still see today, ESG data that exists, but isn’t actionable. 𝗪𝗵𝗮𝘁 𝘄𝗲 𝗰𝗮𝗻 𝗹𝗲𝗮𝗿𝗻 𝗳𝗿𝗼𝗺 𝘁𝗵𝗶𝘀 𝗳𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸: ESG works best when it moves out of narrative reports and into the same analytical space as financial performance. When ESG is measured consistently, it becomes easier to manage risks, identify opportunities, and demonstrate long-term value. -ESG should be tracked using clear, quantified KPIs, not just policies and commitments. -Metrics need to be comparable over time and across peers to be meaningful. -ESG data is most powerful when integrated into strategy, risk management, and valuation, not treated as a side report. -Sector-specific KPIs matter what’s material for banks is different from utilities or manufacturers. -Good ESG measurement strengthens credibility, especially in a world increasingly wary of greenwashing. 𝗪𝗵𝗼 𝗯𝗲𝗻𝗲𝗳𝗶𝘁𝘀 𝗳𝗿𝗼𝗺 𝘁𝗵𝗶𝘀 𝗸𝗶𝗻𝗱 𝗼𝗳 𝗮𝗽𝗽𝗿𝗼𝗮𝗰𝗵? ▪️ Companies, by focusing effort on what truly matters and avoiding KPI overload. ▪️Investors and analysts, by gaining ESG data they can actually use. ▪️Sustainability and risk professionals, by aligning ESG with core business performance. ▪️Policymakers and regulators, by encouraging consistency and comparability. If ESG is about the future resilience of organisations, then KPIs are the language that turns intent into insight. #planetaryhealth #planetaryboundaries #sustainability #ClimateAction #carbonfootprint #NetZero #ClimateEmergency #SDG #ESG #GHG #netzero

For companies with aggressive Net Zero goals, carbon management needs to be treated as business discipline like any other strategic function.   The challenge that many companies exploring carbon strategies are facing is rooted in fragmented data that creates blind spots and disconnected decision making.   If you're considering carbon management and removal investments, start by assessing your data infrastructure: ▫️ Can you determine actuals, not estimates? ▫️ Can you measure and report on how investing in carbon management impacts business performance?   This is why an ERP-centric approach matters. When ESG data is embedded within operational systems, you can manage carbon like other assets, with real-time data, informed planning, and auditable metrics.   🔗 I'm pleased to share that SAP and Climeworks are forming an alliance for carbon drawdown, which will advance this type of integrated approach to carbon management 👇 https://lnkd.in/gqytq-y9   #SAPSustainability  

Great lunchtime roundtable today at #greenbiz on what it really takes to embed climate risk into core business decision making. Quick takeaway from the group: 1. Believability beats complexity Use the language ERM already trusts — severity, probability, velocity, risk matrices. Translate, don’t reinvent. 2. Start cross-functional early Find a champion in ERM, ops, supply chain, or finance. Early involvement drives real buy-in when results are presented. 3. Anchor in risks the business already feels today Start with existing disruptions — facility outages, commodity volatility, supplier issues — then connect to climate drivers. 4. The real goal: ownership + mitigation budget Once ERM understands cost magnitude, the next step is assigning business owners and funding real resilience actions. Big picture: Climate risk is moving from reporting → core business risk → capital allocation. Thanks for purposely (or accidentally!) sitting at the table and enriching the conversation - Annie Christianson, Phoebe Cribb , Natasha Harvey, Ame Igharo Risilience