The Global Association of Risk Professionals (GARP), in collaboration with the Climate Financial Risk Forum (CFRF), recently released A Risk Professional’s Guide to Physical Risk Assessments, a timely and valuable resource for asset owners, operators and investors navigating the evolving landscape of physical climate risk.
The report provides a clear framework for improving how physical risks are measured, modeled, and communicated. But its greatest value lies in the lessons it offers; and fortunately, ClimateFirst is a market-ready solution able to meet these expectations.
Here is a summary of the 5 main recommendations of the report:
1. Ensure Consistency Through Transparent, Validated Models
Key Lesson:
Financial institutions should prioritize solutions with validated, transparent methodologies that reduce uncertainty and produce consistent results across assets and portfolios. GARP found wide dispersion in risk estimates between vendors assessing the same properties, underscoring the need for defensible modeling assumptions and clear documentation.
How ClimateFirst Delivers:
ClimateFirst’s bottom-up modeling approach integrates engineering and climate projections to provide reproducible, transparent results. The analysis integrates downscaled hazard projections – covering both acute and chronic risks – with engineering-based performance models for a distinct building. Each system is evaluated for its likelihood and severity of damage or premature replacement under the projected conditions, producing a granular, system-by-system cost curve to reduce uncertainty.
2. Demand Granular, Asset-Level Data
Key Lesson:
Accurate climate risk assessments can’t be delivered without precise geolocation and detailed asset information. GARP emphasizes that meaningful results require understanding not just where an asset is located, but its design, what it is made of, including its systems and components, and how it is maintained.
How ClimateFirst Delivers:
By analyzing data at the building-system level, ClimateFirst captures the material and mechanical characteristics that drive true vulnerability. This granularity minimizes geolocation errors and provides a more credible picture of exposure than generalized hazard overlays.
3. Translate Physical Hazards into Financial Terms
Key Lesson:
GARP stresses that risk metrics should be financially relevant, helping institutions understand potential losses in financial terms rather than abstract scores or probabilities. Financial metrics enable more effective decision making for capital planning, insurance review, and regulatory disclosure.
How ClimateFirst Delivers:
ClimateFirst quantifies Climate Value at Risk (CVaR), as a building-specific estimate of the potential financial impact (in dollars) that climate change could have on an asset over a defined period. This allows institutions to evaluate exposure, identify cost-effective adaptation measures, and link climate resilience directly to asset valuation.
4. Model Multiple Scenarios and Time Horizons
Key Lesson:
To support both near-term operations and long-term planning, institutions need solutions that assess risk across multiple climate scenarios and timeframes. GARP highlights this as essential for understanding how risks evolve and for aligning with regulatory expectations.
How ClimateFirst Delivers:
ClimateFirst models physical climate risks over 5, 10, and 30-year horizons and assesses risk across different emissions scenarios to enable both short-term capital planning and long-term portfolio resilience strategies.
5. Deliver Actionable, Decision-Ready Insights
Key Lesson:
Physical risk assessments should go beyond identifying hazards; they should guide action. GARP underscores that insights must be practical and actionable, helping teams prioritize resilience measures, justify investments, and integrate adaptation into overall business strategy.
How ClimateFirst Delivers:
Each ClimateFirst assessment includes a Resiliency Plan: a tailored roadmap outlining adaptation measures, estimated costs, and potential avoided losses. This supports proactive decision-making and aligns with disclosure frameworks such as TCFD, GRESB, and LEED v5.
Moving Forward: From Guidance to Implementation
The GARP–CFRF report offers a constructive path forward for the industry. Its recommendations validate what many risk professionals have recognized: credible physical climate risk analysis must be granular, transparent, financially grounded, and actionable.
Encouragingly, ClimateFirst’s tool stack already reflects these best practices, demonstrating though its adoption by leading asset owners and operators around the globe that the capabilities financial institutions need are not theoretical, but are available today.
As the market continues to mature, the next step is clear: choose a climate- assessment tool that provides credible, science-based insights to enable actions and ensure more resilient investment decisions.
