Risk Management Partners
How Risk Management Partners can help companies adapt to climate change
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How Risk Management Partners can help companies adapt to climate change

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    The EU Taxonomy is a tool designed to help investors, companies, insurers, and banks evaluate and disclose how environmentally friendly their investments into a wide range of economic activities are. Companies, large and small, as well as banks and investors can potentially benefit from “green financing” opportunities enabled by the shared standard for sustainable economic activities it has introduced.

    Jump directly to the bigger picture

    Immediately access an in-depth exploration of the Taxonomy and its potential to help your company address climate change. Deep dive the process for applying the EU taxonomy to climate change adaption investments from the perspective of key industries including banking, real estate and insurance as well as from that of the companies seeking financing for key measure to prepare them for climate change. Cut back on research time by using the links provided to the relevant technical annexes containing the fine print.
    The EU Taxonomy, published by the EU Technical Expert Group (TEG) on Sustainable Finance, at the request of the EU Commission, sets out a methodology which companies can use to prove investments to be sustainable. Specifically, where companies wish to qualify for “green loans” the TEG recommends that they “…work through a deliberate resilience-building process to assess their climate physical risks and subsequently…
    …disclose the results and details (e.g., coverage) of the assessment, and the actions taken in response.”
    EU Taxonomy

    The motivation behind the EU Taxonomy

    Currently, there are many different disclosure forms that companies must complete to apply for sustainable investment assistance. And each form has its own criteria and definitions of “sustainable,” which can be both time-consuming and confusing. The aim of the EU Taxonomy is to create a unified standard. 

    Of particular relevance in this article are any investments required to adapt buildings and infrastructure to cope with increased physical climate risks. Because companies need to identify all criteria that align these investments with the Taxonomy and, as such, define them as “green.”

    The good news for organisations wishing to address this challenge is that Risk Management Partners (RMP) offer a Location Risk Intelligence (LRI) Platform that includes relevant scores for most risks included in the Taxonomy. This makes it possible for companies to assess physical risks related to EU Taxonomy disclosures on demand.

    Physical risks included in the EU Taxonomy

    The table below shows the climate-related physical risk that the EU taxonomy requires economic activities to be screen for as part of their eligibility criteria.
    Temperature-related Wind-related Water-related Solid mass-related
    Chronic Changing temperature (air¹, freshwater, marine water) Changing wind patterns Changing precipitation⁴ and types (rain, hail, snow/ice) Coastal erosion
    Heat stress¹ Precipitation⁴ and/or hydrological variability Soil degradation
    Temperature variability⁴ Ocean acidification⁴ Soil erosion
    Permafrost thawing¹ Saline Intrusion Solifluction
    Sea level rise³
    Water stress²
    Acute Heat wave¹ Cyclone, hurricane, typhoon¹ Drought³ ⁵ Avalanche⁴
    Cold wave/Frost¹ Storm² (including blizzards, dust and sandstorms) Heavy precipitation and types (rain¹, hail², snow/ice) Landslide²
    Wildfire¹ Tornado² Flood (coastal² ⁵, fluvial¹, pluvial², groundwater) Subsidence⁴
    Glacial lake outburst
    RMP’s Location Risk Intelligence Platform offers risk insights into a significant proportion of the physical risks companies might wish to address in their EU Taxonomy disclosures. Hazards can be evaluated across different time horizons and scenarios, and this is indicated in the above chart as follows:
    1Risk predictions for present day, 2050 and 2100 available
    2RMP's Location Risk Intelligence provides relevant scores for the present
    3RMP's Location Risk Intelligence provides relevant scores for the future
    4 Coming 2023
    5 Additional time horizons are coming 2023
    EU Taxonomy

    Advantages of putting the LRI Platform to work for your business

    In addition to helping your organisation qualify for green financial assistance, the LRI platform can identify the most relevant perils your company faces and save it significant amounts over the long term. Because the platform enables it to ensure specific insurances are in place to cover the most likely hazards, as well as to invest in adaptation measures to protect against the ever-increasing risk of natural catastrophe. Further, it will ensure you avoid investing in the mitigation of perils your organisation is unlikely to be affected by.

    The report on the EU Taxonomy includes a use case which highlights the utility of RMP’s risk assessment solution in securing “green financing”. It illustrates the points made above by discussing how to evaluate and adapt to increased physical risks on company buildings. The full case is in the white paper available via the link below.

    Contact us to learn the full implications of the EU Taxonomy for your organisation