Civil engineers must report climate-change risk

In 2015 Mark Carney, governor of the Bank of England and chair of the international Financial Stability Board (FSB), highlighted the risk posed by climate change to insurers, financial stability and the global economy. That risk is now a professional reality for civil engineers.

In response to Carney, the Group of Twenty (G20) countries asked the FSB to address climate-change risks in the global financial system. FSB’s taskforce on climate-related financial disclosures (TCFD) recommended that the financial sector and key infrastructure sectors should report on climate-related risks and set out how it should be done.

By 2018, TCFD supporters numbered over 500 organisations, with a combined market capitalisation of nearly US$8 trillion and responsibility for managing some US$100 trillion of assets – a third of global wealth. This level of commitment is making climate change a mainstream issue.

Reporting requirements

TCFD supporters and the infrastructure businesses they invest in now need to disclose how they address climate risks in their governance, operations, strategy, financial planning and overall risk management processes. They will also show what metrics and targets are used to assess and manage exposure to risk, and use scenario analysis to assess how their strategy meets the goals of the United Nations 2016 Paris Agreement on climate change.

While the TCFD recommendations are voluntary, they are supported by governments, being integrated by regulators and already adopted by sustainability and reporting standards, such as Equator Principles and CDP. The UK’s Prudential Regulation Authority published a draft supervisory statement in October 2018 for consultation that would require banks and insurers to report on climate-related risks.

Climate change as a risk

In December 2017, Legal and General Investment Management wrote to ICE and others calling on it to make climate change, an integral part of the professional qualification and practice of members’.Civil engineers already have a professional duty of care, enshrined in ICE’s code of conduct, to manage risks to their clients and society. TCFD strongly endorses climate change as a new class of risk that must be addressed.

Civil engineers could be held to account if they neglect to address climate change in future infrastructure investments and in managing existing infrastructure. Climate change, like health, safety and wellbeing is about to become non-negotiable in the design, delivery and operation of infrastructure.

Understanding the risks

Civil engineers need to start engaging more with academic research, social scientists, policy-makers and the finance community to understand and address the material financial risks from climate change, and their economic consequences. From a practical perspective, the TCFD knowledge hub provides case studies, shared research and some best practice on assessing climate-related risks.

There are also existing standards such as PAS 2080 for quantification of whole-life emissions in infrastructure as well as initiatives such as Science Based Targets on how to transition to a ‘low-carbon’ economy.

Civil engineers should be implementing climate-risk assessments in infrastructure design, delivery and operation that incorporates both assessment of climate risks and resilience interventions, as well as the monetisation of future economic losses from climate and weather-induced asset failures.

The profession has a real opportunity here for leadership and innovation in delivering more resilient, lower-emissions infrastructure.

This article is based on the authors’ briefing article in the latest issue (172 CE1) of the ICE Civil Engineering journal.