ALIGNING FINANCE WITH ADAPTATION

AND RESILIENCE GOALS

Targets and Metrics for Financial
Institutions:
Technical Note

Bernhofen, M. and Ranger, N.

Version 1.0, June 2023

Contribution to the Adaptation Working Group of the

UNEP FI Principles for Responsible Banking
ALIGNING FINANCE WITH ADAPTATION AND
RESILIENCE GOALS
Targets and Metrics for Financial Institutions:
Technical Note
Dr. Mark Bernhofen1,3 and Dr. Nicola Ranger2,3
1SmithSchool of Enterprise and the Environment, University of Oxford
2Environmental Change Institute, University of Oxford
3UK Centre for Greening Finance and Investment

Financial institutions and governments are beginning to develop frameworks and

metrics for adaptation and resilience (A&R) finance analogous to those for net zero and
nature recovery. This technical note, and the accompanying database of A&R metrics,
is part of a series of outputs intended to facilitate and inform discussions around how
to implement the concept of ‘climate resilience aligned finance’. It provides a synthesis
and preliminary analysis of targets and metrics for aligning finance with climate-
resilient development as part of a collaboration with the UN Environment Programme
Finance Initiative’s (UNEP FI) Principles for Responsible Banking (PRB) working group
on adaptation. The accompanying database 1 includes the full set of metrics and is
developed in collaboration with the UNEP FI and PRB. While this technical note is
focussed on financial institutions, the targets and metrics analysed will also have
relevance to governments, philanthropy, public financial institutions (inc. banks and
development finance institutions) and civil society organisations.

1. Introduction
Adaptation to climate change is increasingly urgent. The 2022 Global State of the Climate
report by the World Meteorological Organisation confirmed that the years 2015-2022 were the
eight warmest on record and it recorded the grave impacts of extreme weather and climate
events on populations and economies around the world. In 2022 alone, droughts continued to
plague East Africa, record-breaking rainfall occurred in Pakistan and record-breaking
heatwaves affected tens of millions of people in China and Europe. The impacts of these
extreme events were enormous: driving food insecurity and costing billions of dollars in loss
and damage (WMO 2023). Developing economies’ annual adaptation costs alone are
estimated to be in the range of US$160–340 billion by 2030 to adapt agriculture, infrastructure,
and water supplies; five to ten times greater than current flows (UNEP 2022). Meanwhile,
progress on adaptation goals across many high income countries is weak (CCC 2023).
Aligning finance with adaptation and climate-resilient development is critical to filling this gap.
Mullan and Ranger (2021) define climate resilience aligned finance as: “ensuring that financial
flows are consistent with those needed to achieve climate-resilient development at a societal
level”. Financial institutions and corporates are both exposed to physical climate-related risks

1 https://www.cgfi.ac.uk/adaptation-and-resilience-metrics/
2
and, through their actions, can have a sizeable impact on the physical climate-related losses
and damages of others. Risk management is the first step in aligning finance and this can
have positive spillovers for societal resilience. Investing in resilient buildings and
infrastructure, for example, or resilient supply chains and sustainable agriculture, could have
significant benefits for the economy overall. Providing products and services, such as climate
data, drought-resistant crops or insurance, can also help communities or businesses reduce
their risks. However, a business that did not conserve water in a water stressed area or
contributed to deforestation or pollution could aggravate the risks to communities. As noted by
UNEP (2022), a failure to adapt puts the whole world at risk.
Building more climate-resilient economies and societies will require scaling up the billions of
financial flows for adaptation, but also driving the trillions of dollars of public and private
financial flows and investment away from potentially mal-adapted activities towards those that
contribute to climate-resilient economies and societies (Mullan and Ranger, 2022). Indeed,
this goal is encoded within the Paris Agreement Article 2.1c, which places adaptation and
mitigation on an even footing (UNFCCC, 2015): “Making finance flows consistent with a
pathway towards low greenhouse gas emissions and climate-resilient development.”

Figure 1: Graphic summarising the differences between risk management and adaptation alignment for
financial institutions from Mullan and Ranger (2021). Source: UNEP FI (2022)

There is growing private finance and investor demand for projects with positive outcomes for
adaptation and resilience (IIGCC 2022) and growing focus from governments, Central Banks,
regulators and supervisors and the financial sector itself on ensuring financial resilience to
physical climate change and the alignment of finance with adaptation goals.
Mullan and Ranger (2022) proposed an operational framework for financial institutions to align
finance and investment with climate resilient development (Fig 1 and 2), and UNEP FI (2022)
further built upon this and proposed potential indicators for monitoring and reporting (Fig 2).
This technical note, and the accompanying database, are part of a series of products intended
to facilitate and support discussions around operationalising the concept of climate resilience
aligned finance. They provide a synthesis and preliminary analysis of existing targets and
metrics for aligning finance with climate resilient development.
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2. Indicators for measuring adaptation alignment
While globally agreed upon metrics exist for climate mitigation 2, the same standardisation
does not yet exist for climate adaptation. Existing frameworks such as that of the Taskforce
for Climate-Related Financial Disclosures (TCFD) (as of May 2023) included very limited
coverage of metrics and indicators for adaptation beyond physical risk assessment. The need
to address this gap was recognised by the Climate Financial Risk Forum (CFRF 2023).
Measuring alignment to adaptation and resilience goals, and disclosing that information where
appropriate, could yield significant benefits for society, financial institutions and investors,
synonymous with those for alignment to mitigation (net zero) goals:

• Increase the ability of financial institutions to effectively allocate capital in ways that
support resilience and adaptation goals.
• Increase the ability of financial institutions to track their own contributions to resilience
and adaptation goals.
• Enable investors and lenders to assess the position of companies and portfolios in
relation to adaptation and resilience goals at global, national and local levels, provided
that there is clarity about the use of proceeds.
• Create opportunities to derive value (reputational, commercial positioning, cost of
capital benefits) through increasing alignment with the Paris goals.
• Reinforce incentives for physical risk management across the private sector, and help
to integrate and price risk in a comprehensive way.
• More widely, the disclosure of such information by private institutions will improve
global understanding of the drivers, trends and outcomes relating to alignment for
climate resilience and contribute to the wider assessment in progress against the Paris
goals, as well as Inform public sector action to strengthen adaptation and resilience.
Such metrics could form an important part of adaptation plans. These metrics do not replace
existing mechanisms for tracking international adaptation finance, but will provide vital
information on the alignment of broader (and several times larger) non-climate financial flows
with adaptation and resilience goals. Over time, this could help to drive trillions of dollars into
adaptation-aligned activities and away from activities that undermine resilience and lead to
maladaptation. They should also help to enhance the resilience of financial institutions
themselves to physical climate risks; a win-win for society and financial institutions. As noted
in Section 1, making clear which private investments and financial flows are Paris-aligned in
terms of climate-resilience is an integral part of achieving the Paris goals.

2The common metric for climate mitigation is greenhouse gas (GHG) emissions. The Greenhouse Gas Protocol
provides a standardized methodology for organizations to calculate their GHG emissions.
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Figure 2: Approach to achieving positive adaptation alignment (Mullan and Ranger, 2021) with potential
indicators (UNEP FI 2022). Source: UNEP FI (2022).

3. Indicator Synthesis and Analysis: Data and Methods

Various climate adaptation and resilience metrics have been proposed by different disclosure
frameworks, regulatory bodies, development banks, governments, intergovernmental
organizations, and public and private institutions. These existing metrics vary in both scope
and complexity. We collate and review the existing climate adaptation and resilience metrics;
classify them based on their format, principle, and component 3; and indicate whether they can
be calculated using open data, including that available through the Global Resilience Index
Initiative (GRII). By reviewing the metrics that are currently available, we hope to identify the
gaps in existing metrics, the data and methodological challenges in their calculation, and
eventually propose a set of adaptation and resilience metrics that will be integrated into the
GRII. This analysis is complemented by the work of the UNEP FI PRB Working Group on
Adaptation, which is engaging with banks to narrow in on a set of viable indicators.
In total, 30 sources were reviewed to date (more will be added over time). These sources are
listed in Table 1, alongside the provider (typically the institution who produced the source
material) and a link to the relevant source. Sources of metrics varied from industry disclosure
guidelines to reports published by development institutions. If a metric was deemed to be
related to climate adaptation and resilience (according to the authors’ own calculation) it was
included. In total, 302 different metrics were reviewed.
Table 1. Sources Reviewed for Adaptation and Resilience Metrics
Provider Source / Report Link

ISSB IFRS S2 Climate-related Disclosures link

SASB Industry Standards (77 total) link

TCFD Metrics and Targets link

2021 Report, Appendix 2 link

UNEP FI Physically Fit? How financial institutions can better disclose climate-related physical risks link
in line with the recommendations of the TCFD

3 See Table 2
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 IIGCC Working towards a climate resilience investment framework link

CFRF Climate Disclosures Dashboard 2.0 link

IADB A Framework and Principles for Climate Resilience Metrics in Financing Operations link
Adaptation Solutions Taxonomy
link

World Bank Resilience Rating System link

GCA Adaptation Metrics: Current Landscape and Evolving Practices link

ICMA Suggested Impact Reporting Metrics for Climate Change Adaptation Projects link

OECD OECD DAC Rio Markers for Climate link

Climate-resilient finance and investment link

GRI Reporting Standards link

EU Taxonomy Taxonomy Report: Technical Annex link

GBP Impact Reporting Reporting Working Group: Suggesting Impact Reporting Metrics for link
Climate Change Adaptation Projects

EBRD GET Technical Guide link

MDBs Joint MDB Assessment Framework for Paris Alignment for Direct Investment Operations link

Race to Race to Resilience Metrics Framework link

Resilience

CPI FAST-Infra Sustainable Infrastructure Label: Dimensions & Criteria Indicators link

ACT Initiative ACT PHYSICAL RISKS & ADAPTATION link

CDP CDP 2021 Climate Change scoring methodology link

GBP The GBP Impact Reporting Working Group - Suggested Impact Reporting Metrics for link
Climate Change Adaptation Projects

IRIS IRIS 5.3 Taxonomy link

ARIC ARIC Metrics Menu N/A

Equator Principles THE EQUATOR PRINCIPLES JULY 2020 link

EIB JOINT REPORT ON MULTILATERAL DEVELOPMENT BANKS’ CLIMATE FINANCE link

SBTN SBTN Technical Guidance: Step 1 – Assess link

SBTN Technical Guidance: Step 3: Freshwater - Measure, Set & Disclose link

After inclusion, the metrics were classified (see Table 2). The first classification was by format:
whether the metric was quantitative or qualitative. Some metrics required users to provide a
qualitative description of an action. For example, the SASB Chemicals Industry standards
requires organizations to provide a “description of water management risks and discussions
of strategies and practices to mitigate those risks”. Metrics that could be reported as numbers
were classified as quantitative. An example of such a metric is the TCFD recommended metric
“number and value of mortgage loans in 100-year flood zones”.
The second metric classification was by principle. Here, principle is defined according to the
core principles of climate resilience aligned finance put forward in Mullan and Ranger (2022):
risk management, do no significant harm (DNSH), adaptation opportunities, and supports
societal objectives. A metric was classified as risk management if it referred to the process of
risk assessment or the management of identified risks by an organization. An example of a
metric classified as risk management is the IIGCC metric “proportion of portfolio assessed as
exposed to material physical risks”. A metric was classified as do no significant harm (DNSH)

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if it captured that an activity does not undermine the resilience of others. Metrics such as the
SASB metric “terrestrial acreage disturbed, percentage of impacted area restored” fall into this
category. If a metric captured the opportunities associated with climate change it was classified
as adaptation opportunities. An example of such a metric is the ISSB metric “assets or
business activities aligned with climate-related opportunities”. If a metric showed that an
activity had a demonstrable positive impact on societal resilience it was classified as supports
societal objectives. Metrics such as the GBP metric “reduction in number of customers /
employees suffering loss of essential services” were classified as such. It should be noted that
metrics could be classified as meeting the criteria of multiple different principles.
The third metric classification was by component. Component refers to the stage in the results-
chain of an activity the metric refers to. Ordered increasingly along the results-chain, a metric
could be classified as: input, output, outcome, or impact. An input metric refers to the
resources used during the activity. An example of an input metric is the GRI metric “the costs
of actions taken to manage the risk or opportunity”. An output metric refers to the products or
services that occur as a result of the activity. Examples include the EBRD metric “additional
water made available in the face of increasing climatic variability as a result of the project”. To
be classified as an outcome metric, a metric needs to capture the benefits delivered as a result
of the activity over the short or medium term. The Race to Resilience metric “# of individuals
accessing goods and services” is an example of an outcome metric. An impact metric
considers the high-level strategic goal of the activity. It is similar to an outcome metric but is
more of a long-term vision. An example of an impact metric is the Race to Resilience metric
“# individuals with increased resilience”. The final classification metrics are wider
characteristics based upon Mullan and Ranger (2021).

Table 2. Metric Classification

Description

Classification 1: Format Metrics are classified based on whether they are reported
qualitatively or quantitatively

Qualitative A metric that is not based on numbers. These metrics will often
involve a description of processes

Quantitative A measurable metric based on numbers

Classification 2: Principle Metrics are classified based on the key principles of climate
resilience aligned finance put forward in Mullan and Ranger
(2022)

Risk management Relevant climate-related risks and opportunities have been

identified and managed

Do no significant harm (DNSH) The activity does not undermine the resilience of people or
ecosystems

Adaptation opportunities Product, service or finance provided to support client to adapt

Supports societal objectives The activity actively facilitates societal resilience in line with
relevant goals and plans (‘Resilience through’)

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 Classification 3: Component Metrics are classified based on the component of the results-
chain of an activity they refer to.

Input Raw materials used during the activity – could refer to money,
data, personnel etc.

Output The tangible and intangible products that result from the activity

Outcome The benefits that the activity delivers (short or medium term)

Impact High-level strategic goal of the activity (long term)

Classification 4:
Characteristics
Process-based (yes, no) An indicator based upon the activity undertaken by the reporting
institution.

In addition to classifying the identified metrics according to format, principle, component and
characteristics. We also labelled metrics based on their origin, for example, whether the
metric came from disclosure standards or a MDB guideline document.

Next Steps: Feasibility Analysis and Indices Construction

The next step of the analysis will be to assess the feasibility of each indicator in terms of data
available publicly and client data. As a starting point, in the database, we provide a preliminary
evaluation of whether or not the indicators could be calculated using data from the GRII, or if
there were plans to include functionality for these types of metrics in future.
To mobilise finance at scale for adaptation, and disclose and track progress nationally and
globally, it is vital that all stakeholders have access to the same basic globally consistent
indicators. Central to this common language are consistent, transparent, open and
comparable metrics that allow economic activities to be assessed and measured in terms of
their impact on climate resilience (UNDRR-CGFI 2022). The next step in this work will be to
generate indices needed by financial institutions and make these available openly via the
Global Resilience Index Initiative (GRII) 4. In providing this transparent baseline view of risk,
the GRII enables institutions to assess risks in a transparent and comparable manner and
helps mobilize finance and investment aligned with climate adaptation and resilience.

Acknowledgements: This report was prepared by the University of Oxford Environmental

Change Institute (ECI) and the Centre for Greening Finance and Investment (CGFI) as part of
the Global Resilience Hub of the Global Resilience Index Initiative (GRII). The report was
prepared as an input to the UN Environment Programme Finance Initiative’s (UNEP FI)
Principles of Responsible Banking (PRB) Working Group on Adaptation. GRII is a partnership
between the Insurance Development Forum (IDF), the Coalition for Disaster Resilient
Infrastructure (CDRI), CGFI, the Global Earthquake Model (GEM) Foundation and the United
Nations Office for Disaster Risk Reduction (UNDRR). We thank the UN Environment
Programme Finance Initiative’s (UNEP FI) Principles of Responsible Banking (PRB) Working
Group on Adaptation for their collaboration on this technical note and contribution of data. We
acknowledge the support of ClimateArc, Oxford ECI and CGFI. CGFI is supported by UK
Research and Innovation (UKRI). We thank Alex Money for his review of the note.

4The GRII was launched at COP26 under the patronage of Mark Carney. At COP27, the GRII launched its new
global demonstrator, a report, and four financial use cases. These can all be accessed here.
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