Explore how physical climate risks are shaping investment decisions and driving demand for adaptation finance in the latest Sustainable Finance Outlook.
In this issue, we explore how different investment strategies are exposed to physical risk and how sustainable finance is being activated for climate adaptation. SEB experts will demonstrate how limited data is already influencing investment decisions—and why corporates need to understand how this can affect their investability.
Lead Scientist and Senior Advisor Gregor Vulturius hosts a discussion with Thomas Thygesen, Head of Strategy Equity Research; Samantha Arpas, Sustainable Finance Specialist SEB; Dr. Chiara Trabacchi, Global Adaptation & Resilience Lead at International Finance Corporation; James O'Connor, Principal Climate Risk Officer, the European Bank for Reconstruction and Development on the implications of physical risks for investors and corporates.
While the transition is still underway and electrification is gaining pace, it is too slow to prevent global warming from causing economic damage. Substantial investment is now needed both for mitigation and adaptation. Investors and companies need to know where physical risks are likely to emerge and how to limit the economic and financial damage
Sustainable bonds reached USD 1598bn resulting in a 15% YOY growth despite geopolitical turmoil. Corporate issuers generally allocate only a small share of sustainable finance to investments in climate resilience. By contrast, the most climate-hazard-exposed holdings in selected funds have allocated a substantially higher share to climate resilience than MSCI ACWI companies overall. Asset-level assessment is essential to assess whether sustainable finance can reduce companies’ vulnerability to physical risks and protect investors from financial impacts.
Regulators, standard setters, and financial institutions increasingly expect physical climate risk to be translated into financial consequences and credible adaptation responses. Across corporate reporting, sustainable finance and prudential supervision, frameworks are converging on a more location-specific and forward-looking assessment process, even as differences in materiality, methodology and data continue to constrain comparability.
Asset-level insights from SEB’s Physical Risk Intelligence Tool reveal location-specific and overlapping climate exposures in mining holdings and data centres. Two case studies highlight material physical risk exposure at a mining company’s Chilean properties and identify 48 European data centres with significant exposure to a hazard combination that could strain electricity systems without effective adaptation measures.
Water is fundamental to economic growth, industrial production and societal development. Yet ageing infrastructure, persistent underinvestment, pollution and growing demand are putting water systems under increasing pressure, while climate change brings increasing unpredictability through droughts and floods. This article sets out why water is becoming a material financial risk and how SEB is working with clients to turn it into bankable opportunities.
In the podcast series Transition in Numbers, host Lina Apsheva takes a closer look at the key numbers behind the transition, its progress, and the challenges and opportunities that lie ahead.
SEB flagship report Sustainable Finance Outlook provides insights and market intelligence for navigating the sustainability transition. The report includes regular updates on energy transition investment, sustainable finance markets and regulations as well as topical research.
If you have any questions, please contact:
Gregor Vulturius, PhD
Lead Scientist and Senior Advisor
Climate & Sustainable Finance