New framework factors climate risk into financial valuation

“Factoring Climate Risk into Financial Valuation”

Waterloo, ON (Mar. 13, 2020) – The University of Waterloo has developed a tool to help the capital markets incorporate physical climate change and extreme weather risk into investment decisions.

Researchers at Waterloo’s Intact Centre on Climate Adaptation developed a climate risk framework which will help institutional managers to guide investments, securities commissions to assess disclosure, and credit rating agencies to measure risk by incorporating the impacts of climate change into business analysis.

“Climate change is irreversible, impacting every aspect of our lives, including the capital markets,” said Blair Feltmate, professor at Waterloo and head of the Intact Centre that authored the new report profiling the Climate Risk Matrix, which identifies the most impactful climate change related impacts, specific to industry sectors.

Incentive to write the report came from the Task Force on Climate-Related Financial Disclosures and Canada’s Expert Panel on Sustainable Finance. As suggested by the expert panel’s chair, Tiff Macklem, the Climate Risk Matrix “provides a solid and practical way to assess and value physical climate risks.”

“We now have a framework that uses climate-related data with existing valuation models to determine a company’s climate change risk exposure in financial terms,” said Sonia Baxendale, President and CEO, Global Risk Institute. “The outputs from this framework will be invaluable to regulators and investors by filling in data gaps that are crucial for effectively assessing risk.”

“Climate change and extreme weather risks can represent challenges for capital markets,” said Brian Porter, President and CEO at Scotiabank. “This report provides practical guidance that will help the financial sector to better incorporate climate risk into financial valuation.”

The report, Factoring Climate Risk into Financial Valuation, was generously supported by the Global Risk Institute (GRI), Scotiabank and Intact Financial Corporation, and presents Climate Risk Matrices for the Commercial Real Estate sector and the Transmission and Distribution of Electricity. The report identified that the next sectors best suited for Climate Risk Matrix development are Materials, Energy, Utilities, Industrials and Real Estate.

Mark Carney, Governor of the Bank of England and Special Envoy on Climate Action and Finance to the United Nations, warned that climate disclosure must become comprehensive, climate risk management be transformed, and sustainable investing go mainstream. Climate Risk Matrices offer a practical and readily deployable means to act on Carney’s warning.

Access the Report:

More from the Intact Climate Centre

About Intact Financial Corporation

Intact Financial Corporation (TSX: IFC) is the largest provider of property and casualty (P&C) insurance in Canada and a leading provider of specialty insurance in North America, with close to $10 billion in total annual premiums. The Company has over 13,000 full- and part-time employees who serve more than five million personal, business, public sector and institutional clients through offices in Canada and the U.S. In Canada, Intact distributes insurance under the Intact Insurance brand through a wide network of brokers, including its wholly-owned subsidiary BrokerLink, and directly to consumers through belairdirect. In the U.S., OneBeacon Insurance Group, a wholly-owned subsidiary, provides specialty insurance products through independent agencies, brokers, wholesalers and managing general agencies. For more information, visit

The Intact Centre for Climate Adaptation (ICCA) was developed after five years of research and discussions with the University of Waterloo. The ICCA is a national applied research centre focused on bringing practical and cost-effective solutions to address climate change and extreme weather events. Every Canadian has felt the effects of climate change in recent years. The ICCA serves as an incubator to promote new ideas on how we, as a country, can adapt to the ever-changing weather.

About the University of Waterloo

University of Waterloo is one of Canada’s top innovation universities. With more than 36,000 students and the world’s largest co-operative education system of its kind, its unmatched entrepreneurial culture, combined with an intensive focus on research, powers one of the top innovation hubs in the world. For more information about Waterloo, please visit

SOURCE: Intact Centre on Climate Adaptation, Faculty of Environment, University of Waterloo

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