Climate Risk Assessment

A Climate Risk Assessment is a systematic analysis that evaluates how current and projected climate hazards, such as increased flooding, heat stress, drought, sea-level rise, and extreme weather, as well as low-carbon transition policies, may affect a project's physical assets, operating environment, and the communities it serves, informing design choices that make the project more resilient.

What is a Climate Risk Assessment?

Development banks including the World Bank, ADB, EBRD, and EIB now require climate risk screening and, for significant projects, a full climate risk assessment as part of project preparation. The assessment distinguishes between physical risks (direct impacts of climate change on infrastructure, ecosystems, and people) and transition risks (policy, market, or technology shifts as the world decarbonises that may affect the project's viability or the borrower's ability to repay). It draws on climate projections for the project's location across multiple time horizons, typically to 2050 and 2080, and assesses which hazards are material for the project's design life.

The findings feed directly into project design, triggering adaptation measures such as elevated infrastructure standards, flood-proofing, drought-resilient crop varieties, or alternative siting. They also feed into the eia where climate risks intersect with environmental impacts, and into the escp where specific adaptation commitments are recorded. The sia addresses climate-related social risks such as community displacement due to sea-level rise.

Why a Climate Risk Assessment matters for bidders

Contractors and consultants working on development bank projects are increasingly required to demonstrate climate literacy. Engineering firms bidding on infrastructure design may be asked to conduct or review a climate risk assessment as part of their scope of services. Construction contractors may face technical requirements derived from climate risk findings, such as higher design flood levels, heat-resistant materials, or enhanced drainage specifications. Consulting firms offering climate risk assessment services have a growing market across all major development institutions, which have committed to aligning their portfolios with the Paris Agreement.

FAQ

Is a climate risk assessment the same as a carbon footprint analysis?

No. A climate risk assessment focuses on how climate change affects the project (inward-facing risk). A carbon footprint or greenhouse gas analysis measures the emissions the project generates (outward-facing impact). Some development banks require both, but they address different questions.

What climate data sources are typically used?

Assessors commonly use global datasets from the IPCC, World Bank Climate Change Knowledge Portal, and regional climate models. Country-specific national meteorological data is incorporated where available and reliable.

At what stage of project preparation does the assessment occur?

Climate screening typically happens at project identification, with a full assessment completed during preparation and incorporated into the Environmental and Social Assessment before appraisal. For long-lived infrastructure, assessments may be updated at mid-term review.