A few weeks ago, we had the opportunity to attend the Climate Adaptation Planning Summit in Wellington, organised by Brightstar.
The event brought a different crowd than we are used to – local and central government had an excellent representation, along with attendees and speakers from asset management, engineering, scientific or industry-specific backgrounds. The key messages that we have taken home are:
- There is a climate urgency currently. Or is there?
If there was, should we, as a society, go harder? The current economic viewpoint is focused on the cost-of-living crisis.
- Climate-related disclosures are mandated from 2023 for 200~ large entities, and cover governance, strategy, risk management and metrics & targets associated with climate risk management. While limited to those larger organizations, there are benefits for smaller companies or government agencies to undergo the same processes and assess in an honest and robust manner the adequacy of their climate risk management practice – especially considering scenario analysis, dataset availability for calculating physical and transition risk proxies and other developing requirements (such as transition planning). If there is a motto to keep in mind with regards to the disclosure and associated analysis work for climate risk management, it is that they need not be perfect to yield good information; what is important is to get started, and improve with time; as a corollary, the longer a business takes before taking action for its climate risk, the harder it will be when they start.
- Asset management is typically interested in a long time horizon (60-80 years for a typical asset for electricity distribution). If investing in new infrastructure or renewing existing infrastructure, asset managers will need to understand the pattern evolution of the physical risks which are likely to impact the assets.
Managing the associated transition risk will become critical. For example, power generation and distribution may be fit for purpose, given the current needs, but if more EVs are on the road in the coming years, and gas and coal boilers are phased out and replaced by heat pumps, additional stress will be put on the grid.
While considering scenario analysis, and given the timeframes described above, the size of the population could swing from an extreme (an estimate of 18m by 2100 if New Zealand welcomes climate refugees during the 21st century) to another (New Zealand closes their borders for most purpose, and population shrinks by 2100 from current levels).
- Engineering has fascinating tools in its toolbox, such as nature-based solutions – i.e., using the ecosystem for resilient development and mitigating physical risk. The goal of those solutions is to reduce drastically the severity and costs associated with climate change events. An example of this was a waterway given a narrow throttle when an area was settled, which was prone to excessive flooding. The nature-based solution was to increase the meandering of the river and plan native trees.
- Climate risk adaptation needs to encompass not only the assets risk (physical or financial) but also the risk to the communities they serve. Adaptation needs to be seen through a holistic view, which then fosters an understanding of the propagation of climate risk, rippling through the different layers for example, from an infrastructure asset to the community, to council funding, to the financial services. Climate risks can have a compounding effect in the overall system.
While it is possible for individuals and communities to tolerate a catastrophic climate event, the tolerance will erode as the frequency of climate events increases, leading to a downward spiral (as seen currently in the Gisborne region (Te Tairāwhiti)
Adaptation hence leads to questions about whether to protect, accommodate or abandon (retreat) from perceived increasing physical risk threat.
- As often when complex systems are involved, data plays a key part in the discussion. There is a clear need to integrate relevant data across the asset lifecycle, from planning to acquisition, to operations and maintenance, to disposal. Identifying the right metrics to measure or estimate, through using subject matter expertise and analysis is essential; an example provided was for wind turbine: estimates of the number of hours when the turbine would be exposed to windspeed above a given threshold is a more interesting figure than the maximum expected windspeed if we consider the resistance of the wind turbine to exposure.
Tools such as digital twins developed by Wellington City Council (Wellington Digital Twin | Buildmedia) can help to test climate resilience, scaling up adaptation planning and reframing the climate risk. From an existing picture of the city, additional layers (such as sea level rise) can be simulated with a faithful representation of the topography.
Climate adaptation is still evolving, as the weather patterns are better understood. The lessons from climate related disclosures can be applied to improve climate risk management practice and lend support to initiatives to provide and then refine the data needed to drive decision-making and disclosures.
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