Climate Risk Management Capability

Going Green had the chance to sit down with Chris Donohue, the Managing Director at Global Association of Risk Professionals (GARP), which is a not-for-profit membership organization, founded in 1996, focused on elevating the practice of risk management, to talk about climate risk management capability.

Chris, thanks for being here. Tell us a little bit about you and GARP:

I am the managing director at Global Association of Risk Professionals (GARP), which is a not-for-profit membership organization, founded in 1996, focused on elevating the practice of risk management. 

What is your role in the company:

I work as the Managing Director of the GARP Benchmarking Initiative, which is a data utility that allows financial services firms globally to benchmark themselves in critical areas of risk management against peer firms. Over the past two year, our studies have included surveys of financial services firms globally on their current capabilities in climate risk management.

How did you get involved in the sustainable industry?

Historically, GARP has primarily served its mission through certification and our flagship program is the Financial Risk Manager (FRM), which is focused on traditional risk management (credit risk, market risk, operational risk), which until a few years ago had almost no coverage of climate risk. We regularly look for areas of emerging risks and identified climate risk as a domain where there is a large gap between the supply and demand for people with the skills and knowledge needed.

Demand is high because both physical and transition risks of climate change are growing, and supply is low because there is limited knowledge of climate-related issues within organizations – climate change is complex and the impacts are uncertain, non-linear and hard-to-predict, which render credit models, for example, less useful and reliable.

What trends are you seeing in your industry?

From our surveys the last two years, we have found an enormous range of practice in climate risk management capability and that everything starts with proper governance at the board level. We can see that firms are evolving in terms of deepening the discussions, building awareness more broadly across the firm and looking for better answers (including finding better data and enhancing models)

What is one “Action Item” the viewers can take away from this conversation?

Building a strong climate risk management function within a firm takes time, because building internal alignment on climate strategy, finding people with the right expertise, sourcing relevant data and defining meaningful metrics are challenges all firms face, so the one action item all firms have is to get started.

Thank you Chris, for taking the time and diving deep into climate risk management capability.

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