Develop internal structures, policies, and processes that facilitate portfolio alignment to occur.
Encourage investment assets to improve their management of material physical climate risks.
Advocate for an enabling external environment for portfolio alignment to occur through systems stewardship.
CRIF has been developed for investors that wish to consider how physical climate risks may require enhanced management to accurately assess an asset’s financial returns. It supports investors with practical and best practice ideas that they can use in their own individual management of physical climate risks
Better management of physical climate risks from a financial materiality lens can help to:
CRIF provides recommended action points developed from major industry initiatives, seminal resources, and investor-led working groups on a best-effort basis. They can support investors to develop and communicate their own contextually relevant actions, strategies and/or plans to manage material physical climate risks.
Asset owners: Asset owners are encouraged to use the full framework but should note that different teams will find certain sections more relevant than others.
Asset managers: This framework may be used, where applicable, across all AUM. The language contained within this framework can also be used to communicate progress to clients and other relevant stakeholders. They are also encouraged, when possible, to develop CRIF aligned products, funds, and strategies; and educate clients on these offerings, including consistent mandates to clients who seek them.
Investment consultants: Investment consultants can to integrate this framework into solutions and services including asset manager recommendations, and work with clients on CRIF adoption
CRIF has been designed in complement to the Net Zero Investment Framework (NZIF), adopting the same broad structure and largely the same guiding principles.
Both frameworks can be applied by investors in their individual physical, legal and regulatory contexts and subject to the fiduciary duties owed to their clients and beneficiaries.
To support investors who are seeking to increase adaptation and resilience to physical climate risks in their portfolios and in the real economy.
Alignment based on available (at the time of writing), reasonable, and supportable data and information without undue cost or undue uncertainty.
Feasible for investors to implement, build on existing work, and be compatible with existing processes.
Definitions, methodologies and strategies should be clear and easily applied.
The framework should allow investors to demonstrate accountability to clients and other stakeholders.
Adaptation and resilience plans are vital for investors. Physical climate risks have always existed, are expected to increase their materiality and significantly affect asset performance and credit worthiness for investor portfolios.
The premise of CRIF is that increasing physical climate risks are unlikely to be robustly priced into asset valuations.
Proactively managing (and reducing whenever appropriate) physical climate risks should be a priority. Retreating from highly exposed sectors and geographies is likely to shrink the investable universe, negatively impacting financial returns.
This framework aims to support investors to manage material physical climate risks to their individual portfolios. PCRAM aims to build the financial case for adaptation and resilience investment.
However, many important adaptations are akin to public goods and require a multistakeholder approach. Consequently, investors cannot always be expected to finance and implement adaptation options entirely themselves due to the inability to sufficiently internalise financial benefits.
Finally, it is hoped that many investors use this framework, and thus the language used within it, to support a common basis to communicate the state of play regarding their management of physical climate risks within their individual portfolios to regulators, stakeholders, beneficiaries and clients.
It is recognised that many implementation barriers frustrate complete implementation of all recommended action points within CRIF.
The framework is designed to support efforts to address this issue, most notably through its ‘Policy Advocacy’ as well as ‘Stakeholder and Market Engagement’ sections which underpin systems stewardship efforts.
Additionally, further implementation guidance will be produced to support investor efforts to implement CRIF. This includes bringing stakeholders across the value chain together to work collaboratively to address barriers.
The overall aim is to provide target setting and implementation guidance for the main asset classes that comprise most investment portfolios. Currently, guidance for all asset classes is not available but will be developed over time.
Gaining an understanding of the resilience of physical assets can help frame the resilience of the wider economic system within which corporates operate, either through their owned or operated physical assets, or those on which their value chains rely on.
For instance, infrastructure is considered an important initial asset class because its vulnerability has systemwide implications for all those that depend on it for public services and normal business operations.
In future, additional asset classes will be covered including sovereign bonds, as well as listed and unlisted corporate assets. On a best-effort basis, cross-cutting themes will continue to be integrated (e.g. nature and emerging markets).
Read our insights and related guidance below to understand more about CRIF, Adaptation and Resilience, and understand how investors are putting it into action.
Helps members to effectively integrate climate risks and opportunities.
