In recent years, the global economy has been shaken by the COVID-19 pandemic, geopolitical conflicts, supply chain disruptions, an energy crisis, and high inflation. These challenges are unfolding against the backdrop of an escalating climate emergency.
Climate change
Climate change amplifies other crises—intensifying resource conflicts, damaging infrastructure, disrupting supply chains, expanding the reach of dangerous pathogens, and destabilizing the natural systems we rely on. As the US Pentagon aptly stated, “climate change is a threat multiplier.”
The transition to a sustainable, net-zero future is essential but requires fundamental shifts across nearly every economic sector. These changes carry inherent risks for the businesses and communities they affect. Financial institutions, in particular, must navigate a rapidly evolving landscape where both physical climate hazards and transition risks pose significant credit, market, and operational challenges.
Proactive institutions will assess these risks and develop strategies to manage them, ensuring long-term resilience and success through thoughtful planning today.
Climate Risk
For over 30 years, UNEP FI has been at the forefront of sustainability and finance, equipping financial institutions with the tools and strategies needed to address the world’s most pressing environmental challenges. Through its Climate Risk and TCFD Programme, UNEP FI has collaborated with over 100 financial institutions to analyze climate change’s physical and transition risks.
This work has underscored the need for a foundational understanding of climate-related risks and their sector-specific impacts; in this case, it is for the transportation sector. Each brief offers tailored guidance and recommendations to help financial institutions effectively manage their risks and those of their clients. UNEP FI aims for these resources to empower financial professionals and foster communication about climate risks within institutions and across the financial sector.
The goal is to raise awareness and spark meaningful conversations that drive strategic and operational change. Ultimately, the accurate measure of this series’ success will be its integration into decision-making and risk management.
Adaptive and Mitigation Actions
Resiliency Planning
As global temperatures rise and climate change intensifies, the transportation sector’s infrastructure and supply chains face growing risks from physical hazards. Firms can develop resiliency and adaptation plans for their most critical sites and supply networks to address these challenges. These plans should start with assessing current climate risks and asset vulnerabilities while also considering various climate scenarios that project changes in the frequency and severity of these risks over time.
Resiliency planning should also establish response procedures for business units to manage potential supply and downstream consumption disruptions. Clients in the transportation sector can strengthen their adaptation strategies by integrating measures that address other environmental concerns, such as flooding, water stress, air quality, and biodiversity conservation. However, ensuring that these measures do not inadvertently increase climate risks for neighboring communities is essential.
Climate-Ready Infrastructure
The transportation sector relies on critical infrastructure, including ports and production facilities, which must be resilient to extreme climate events. Firms should invest in climate-ready assets to withstand these challenges to enhance long-term sustainability. Key physical risks identified through vulnerability assessments should be incorporated into infrastructure development plans, particularly for road networks, ports, and terminals.
Investments in resilient infrastructure and technologies will be necessary to strengthen the sector’s ability to withstand climate impacts. Clients and financial institutions should utilize screening tools to assess climate risks and explore alternative transport networks. Additionally, retrofitting existing infrastructure with climate defenses—such as sea walls and on-site backup power generators—can improve resilience for key facilities like ports, terminals, and buildings. Investments that provide environmental co-benefits can further enhance effectiveness, and engagement with local stakeholders will be critical to successfully implementing resiliency measures.
Source: UNEP FI