OREANDA-NEWS. June 4, 2012. The Asia Investor Group on Climate Change (AIGCC) and BNP Paribas have begun a unique collaboration to publish a series of reports showing detailed scenario analysis of the impact of climate change related risks in major cities and industrial and logistics centres in Asia Pacific.

In collaboration with a number of leading universities around Asia, projections and simulations will be created using computer modelling to establish the physical impacts on these areas and to determine the risks to high-value infrastructure, construction and supply chain assets.

“The methodology of the research allows us to identify specific companies that may be significantly exposed to climate risk costs and will enable investors to better understand the potential impact of such costs on their investment portfolios. This research will be of great value to institutional investors, as well as the insurance industry and also management of the companies covered,” said Alexandra Boakes Tracy, Senior Advisor of the AIGCC.

The first report scheduled for publication covers climate change adaptation risk in Hong Kong and the wider Pearl River Delta, including Macau, Shenzhen and Guangzhou. AIGCC and BNP Paribas have chosen to launch the series here because this highly developed region clearly demonstrates the two fundamental elements driving the climate challenge in Asia today: significant local vulnerability to more intense weather events, and the increasing financial value of the assets and operations at risk.

The Pearl River Delta has been the most dynamic regional economy in China since the launch of the reform programme in 1979, generating in recent years approximately one third of all China's exports and attracting a quarter of total foreign direct investment into the country. The area has become one of the world's leading manufacturing centres, housing tens of thousands of factories, and is a major transportation and logistics hub for North and Southeast Asia.

However, much of this development sits on reclaimed land across a natural flood plain, leaving the region already highly exposed to natural hazards such as river or tidal flooding, typhoons and saline water intrusion. These events will be intensified by climate change.

Asset mapping and simulations

AIGCC and BNP Paribas will work with scientists from the Hong Kong University of Science and Technology to overlay simulations of climate and weather scenarios onto detailed mapping of infrastructure, construction and manufacturing plants in the Pearl River Delta region. Assumptions as to the severity, duration and likelihood of the various scenarios will be developed in order to forecast physical effects on the fabric and operations of the assets, and the resulting impacts to business and financial performance. Consequences for companies which do not own these assets, but are reliant on them, for example, as part of a supply chain or transportation network will also be considered and quantified. The published report will contain company-specific analysis and financial modelling of these impacts, adjusted as appropriate for exposure to assets and sector vulnerability.

Jon Harris, Head of Equity Research of BNP Paribas said: “Environmental risk to companies is one of the most important, and least rigorously explored, issues facing investors today. The studies will look at identifying and quantifying specific risks in the cities in which we live. It will complement our company level work of BNP Paribas that we do every day in Risk Expert Environmental. BNP Paribas is delighted to be working with our research partners, the Asia Investor Group on Climate Change (AIGCC) and ASrIA on this research series. We would like to help bring deeper knowledge and understanding to our clients and the wider investment community as to where these risks may become real threats to business continuity and the continued economic development of key cities in the Asia Pacific region.”

This project is fully consistent with BNP Paribas' CSR environmental strategy which is focused on tackling climate change both through its range of products and services and through supporting research activities to contribute to the advance of climate science.