Guidelines for Integrating Physical Climate Risks in Infrastructure Investment Appraisal
Summary
PCRAM has been conceptualised and developed by the Asset Design & Structuring (ADS) working group of the Coalition for Climate Resilient Investment (CCRI).
CCRI is especially grateful to Mott MacDonald for their instrumental support as lead partner throughout the development of the methodology, and the opportunity to leverage the global capabilities of the engineering and development consultancy. PCRAM is a global public good made possible by the collaboration of 35 different institutions, ranging from investors, engineering firms,
climate risk data providers, lenders, credit rating agencies and academic institutions.
The methodology captures the collaborative approach of various specialists in a joint effort to advance a dynamic impact assessment of physical climate risks (PCRs) that can be incorporated in investment decision making. The document combines three main expert subject matter areas: climate science, infrastructure asset management & engineering, and infrastructure finance.
This methodology is the first of its kind given the depth and breadth of expert groups and related technical disciplines that have contributed to different stages of the analysis. PCRAM enables a rigorous interpretation of climate risk analytics and related science to assess the operational, commercial and financial materiality of an infrastructure asset, well beyond a traditional approach
exclusively focused on i. loss & damage assessments, ii. acute hazard only, and iii. immediate to short-term horizons.
PCRAM takes into account the impact of PCRs on revenue and cost projections and changes in credit quality simulations. In sum, PCRAM is expected to contribute to a shift in the perception of resilient investments from being loss-minimisation exercises
to contributing to strategic reviews that lead to value optimisation and the enhancement of investment appraisal practices.