Physically Fit? How Financial Institutions Can Better Disclose Climate-Related Physical Risks in Line with the Recommendations of the TCFD

The document identifies a significant 'blind spot' in financial sector climate reporting, where institutions overwhelmingly prioritize transition risks over physical risks. Based on desk research and reviews of leading financial institutions, the paper finds that physical risk disclosures are currently incomplete and inadequate, with less than half of surveyed institutions reporting on physical risk analysis. It argues that historical data is insufficient and that forward-looking climate models are necessary for accurate risk assessment.

• Current identification, measurement, and disclosure of physical climate-related risks by financial institutions are insufficient for stakeholders to determine the extent of the risks facing these institutions and their clients.
• Financial institutions frequently neglect physical risk analysis in their reporting, with less than 50% of surveyed institutions including it in their climate disclosures.
• Physical risk scenario analysis is underutilized among banks; only about 25% have conducted such analysis, and of those, fewer than 20% assess how those scenarios impact their businesses.
• Existing scenario-based physical risk disclosures are limited in scope, typically focusing on only one or two sectors and a small number of hazards.
• While historical data provides some insight into current risks, it cannot replace risk assessments derived from forward-looking climate models.
• Regulators such as the European Central Bank (ECB) and the U.S. Securities and Exchange Commission (SEC) have observed that physical risks are disclosed less frequently than transition risks.

APA

World Resources Institute (n.d.). Physically Fit? How Financial Institutions Can Better Disclose Climate-Related Physical Risks in Line with the Recommendations of the TCFD. https://www.wri.org/research/physically-fit-financial-institutions-climate-recommendations-tcfd

Chicago

World Resources Institute. Physically Fit? How Financial Institutions Can Better Disclose Climate-Related Physical Risks in Line with the Recommendations of the TCFD. n.d. https://www.wri.org/research/physically-fit-financial-institutions-climate-recommendations-tcfd.

Wikipedia

{{cite report |author=World Resources Institute |title=Physically Fit? How Financial Institutions Can Better Disclose Climate-Related Physical Risks in Line with the Recommendations of the TCFD |url=https://www.wri.org/research/physically-fit-financial-institutions-climate-recommendations-tcfd |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldresourcesinstitutendphysically, author = {{World Resources Institute}}, title = {{Physically Fit? How Financial Institutions Can Better Disclose Climate-Related Physical Risks in Line with the Recommendations of the TCFD}}, institution = {World Resources Institute}, url = {https://www.wri.org/research/physically-fit-financial-institutions-climate-recommendations-tcfd}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }