Science is at the heart of COP28

Against a backdrop of record global temperatures and associated extreme weather events, climate diplomats from 198 countries are wrapping up intense negotiations at COP28, the biggest U.N. climate summit to date. A major feature of the summit has been the completion of the first ‘global stocktake’ of progress towards the 1.5℃ Paris Agreement target, an exercise that has confirmed the world is far off track from staying below this "safe" level of global heating. 

Research released during the conference suggests that 2023 will see record CO2 emissions and an average global temperature of over 1.4℃ above pre industrial norms. It is therefore clear that climate impacts are going to increase in both frequency and intensity in the years and decades ahead, and that managing these climate impacts and risks will become ever more important.

As COP28 began, conference President Sultan Ahmed Al Jaber caused widespread alarm by seeming to question the science linking the phase-out of fossil fuel to the 1.5℃ Paris Agreement target. Al Jaber later claimed to have been misrepresented, saying that "everything this presidency has been working on, continues to work on, is focused on and centred around the science." 

Although the controversy surrounding Al Jaber's remarks reflects concern about his role as chief executive of the Abu Dhabi National Oil Company along with deep political divisions at COP28, it also starkly illustrated the fundamental importance of science to the understanding of climate change and the risks it poses.

Climate science is indisputable

The science of climate change remains indisputable. Using satellite observation and other methods, scientists can measure both the solar energy hitting the earth and the energy reflected from the earth with great precision. The energy absorption properties of carbon dioxide in the atmosphere is also well understood and so, for the planet as a whole, it is possible to predict how temperature will rise as the atmospheric concentration of CO2 increases as a result of burning fossil fuels. Climate models from 50 years ago have proven extremely accurate in predicting the global heating associated with atmospheric CO2.

However, the picture becomes much more complex when predicting how this heating will affect the climate (and thus the probability of extreme weather) at any particular location on the planet. The earth's climate system is driven by many variables, including the planet's tilt and rotation, air and ocean currents, ice albedo (reflectivity), and many other factors. These factors are also dynamic and are influenced by feedback loops. As the Arctic ice melts, for example, it reflects less solar energy thus leading to further warming. All of this complexity adds to regional and local climatic influences, making site-specific predictions of climate impacts and risks extremely challenging.

Climate models show severe physical impacts

Advances in earth sciences, data collection, programming, and computing power have allowed the development of climate models of exceptional sophistication. Incorporating constantly expanding data sets and new understandings of earth systems, climate models now include atmospheric, ocean, ice, biological, and other components, run at higher spatial resolutions. Global climate models (GCMs) provide input into regional climate models (RCMs), downscaled for local predictions using statistical methods and weather forecasting models. These models are often run many times and output can be combined with the output of other models to enhance accuracy and resolution.

The global climate modelling framework feeding into the UN's IPCC process (CMIP6), for example, involves 53 different modelling groups running 100 distinct climate models. At 1.5℃ of global heating it shows drought affecting nearly a billion people, a 24% increase in the global population exposed to flooding, a 40-54% increase in Mediterranean wildfire damage and many other effects associated with increases in the frequency, intensity, and severity of extreme weather events.

Financial regulators increasingly require climate risk data

As the impacts of climate change become increasingly apparent and pressure from governments, investors and financial regulators grows, companies and financial institutions are facing a host of reporting and disclosure requirements being implemented around the world. These requirements include the EU's Corporate Sustainability Reporting Directive (CSRD), the UK's Climate-related Financial Disclosure Regulations (CFDR), California's SB 253 and SB 261 rules and the International Sustainability Standards Board’s (ISSB's) climate-related disclosure standards, intended as a global baseline for international comparability and consistency. Each of these regulations and standards requires the disclosure of both emissions and climate-related risk data.

Banks too are increasingly the focus of regulators concerned not only about risks to individual financial institutions but about risks to the entire financial system. The European Central Bank (ECB) has begun enforcement measures against banks failing to assess climate and environmental risks across their portfolios, for example, while the European Banking Authority (EBA) has recommended the inclusion of climate risk into prudential rules under the Pillar 1 framework. These proposals would require banks to include climate risks in internal stress testing programmes, property collateral valuation and operational risk assessments, among other things.

The US Federal Reserve is also concerned about climate risk, assessing the potential for banks to conduct stress testing to manage climate-related risks to financial stability and introducing a new measure to estimate the expected capital shortfall of banks in a climate stress scenario. The People's Bank of China, the Bank of Japan and many other central banks and financial regulators are also examining the climate risks facing banks and the financial system. All of these exercises require quality modelling and data down to the level of corporations and individual assets at specific locations.

Quality climate risk assessments are available

Identifying, managing, and adapting to climate risks involves understanding where these impacts might materialise and how they might affect people, businesses, and the economy. 

What buildings are vulnerable to increased flooding risk or ground subsidence? How might more intense droughts and extreme heat events affect crops? What infrastructure is exposed to increased flooding and how might companies that depend on that infrastructure be impacted? How might banks that lend to these companies be affected? How might rising sea levels affect a coastal town or a beach property? These are some of the questions I had to answer during over a decade of risk management at the heart of one of the world’s biggest banks in London, Istanbul, and Hong Kong.

Flooding, sea level rise, wildfires, storms, and other extreme weather events associated with climate change pose an increasing threat to the buildings, facilities, and operations that companies depend on to do business - as well as to the buildings, facilities and operations of key suppliers. Spectra analyses these risks for every individual asset, highlighting vulnerabilities and revealing opportunities for protection, adaptation, and risk mitigation. This information is also important in developing a wider strategy for managing climate risk, as required by climate-related financial reporting regimes, investors, and other stakeholders.

Data quality and transparency is critical

Assessments of climate risks are only as good as the data behind them, so such science-based, site-specific and transparent detail is crucial to accurately understanding how climate change will affect assets, portfolios and organisations under different emissions scenarios.

The importance of data on the state of the world's changing climate and on the emissions that cause it has been the subject of a host of side events surrounding the COP28, with delegates emphasising the importance of data quality, credibility and transparency. 

Former Bank of England governor Mark Carney, UN Special Envoy for Climate Action and Finance and Co-Chair of the Glasgow Financial Alliance for Net Zero, was direct in calling for consistent, comprehensive and decision-useful climate disclosure in order to meet targets, also stressing the importance of quality data to this process.

It's all about the science

As COP28 drew to a close, conference President Al Jaber called for negotiating parties to "deliver the highest ambition." Perhaps chastened by the controversy over his earlier remarks, he was unequivocal in expressing the importance of science to understanding and addressing the profound risks of climate change. "I want everyone to remember that we have a unique opportunity," he said as the talks reached their final stage. "It is our opportunity to deliver an outcome that is based on the science led by the science and equipped by the science that keeps 1.5 within reach. And that will help transform economies for generations to come."

That science is clear. Human emissions of CO2 and other greenhouse gases are warming our planet and that warming is changing our climate and increasing the frequency and intensity of extreme weather events. The damage and disruption from those events is a clear, present and increasing danger to people, assets, businesses and banks everywhere - a fact recognised by governments and financial regulators. And the only way to mitigate, adapt to and manage this risk is through the use of high quality, accurate and transparent climate risk data.