Mainstreaming Physical Climate Risk Disclosures And Adaptation In Esg Matrices

The New Delhi Declaration solidifies the G20’s commitment to achieving net-zero emissions by around 2050, stressing corporate adherence to Net-zero targets and essential policy and regulatory measures, including climate disclosure. However, the alarming breach of the 1.5°C global warming limit and a projected surge in extreme weather events causing nearly USD 223.8 billion in losses in 2022 alone necessitate urgent attention to climate adaptation and disclosure of physical climate risks within mainstream ESG frameworks. As of 2022, merely 4 per cent of the top 100 companies align fully with the Task Force on Climate-Related Disclosures (TCFD) recommendations, primarily focusing on transitional climate risks’. A lack of awareness, the complexity of frameworks, and a dearth of detailed guidelines on physical climate risk on financial metrics pose significant challenges to disclosing this material risk. This limited disclosure impedes investors and lenders from appropriately assessing risks, leading to the misallocation of capital, threatening financial stability, and arresting economic growth. Amidst the TCFD’s transition into the International Sustainability Standards Board (ISSB), we analyse how prepared the corporations of the G20 countries are to disclose physical climate risks. In this paper, we recommend guidelines on how to integrate physical climate risk disclosures into ESG frameworks. This involves developing detailed guidelines on how to conduct these risk assessments, ensuring interoperability of ITask Force on Climate-related Financial Disclosures. 2023. “Task Force on Climate- related Financial Disclosures 2023 Status Report.” TCFD. https://www.fsb.org/2023/10/2023-tctd-status-report-task-force-on-climate-related- financial-disclosures/. disclosure frameworks across G20 countries to eliminate the need for reporting from multiple avenues, and developing a climate risk modelling platform for knowledge sharing and capacity building. Additionally, we explore scenarios of outcomes that involve trade-offs of the recommendations and a shift from qualitative to quantitative disclosures of physical climate risk and adaptation strategies through global cooperation. We explore how these strategies can positively impact stakeholders, advocating for a comprehensive approach to climate resilience that generates social, economic, and environmental co-benefits.