Climate Transition Risk Survey: Capital Providers for Tropical Soft Commodities

by | Dec 7, 2020

The financial sector is increasingly aware of climate risks. It is not clear, however, how that translates into their decision-making. To see how climate transition risks factor into financial decisions impacting tropical soft commodities, Orbitas partnered with PwC to conduct a survey of 24 capital providers.

The survey uncovers four key findings:

  1. Financial institutions are aware that investments in tropical soft commodities (TSCs) carry climate risks, but none currently use scenario analysis to quantify their risks from TSC production.
  2. TSC climate risks are generally not integrated into financing. One-third of financial institutions don’t assess climate transition risks at all. No institutions interviewed consider the climate risks (physical or transition) specific to tropical commodities when designing financial instruments used with TSC companies.
  3. Institutions currently lack the data and tools to monitor these risks effectively: only five institutions are currently using tools to assess climate transition risks specific to TSCs. All institutions were eager to receive additional resources to support their assessment.
  4. Opportunities for more sustainable financing exist. Four institutions are innovating with sustainability-linked loans for TSCs, while others use ESG scoring to differentiate companies. Scenario analysis would quantify risks for institutions developing these new financing products.

The Orbitas-PwC Climate Transition Risk Survey demonstrates the need for more systematic analysis by financial actors of the risks and opportunities that climate transitions will create. This includes the scenario analysis developed through Orbitas’ methodology, in conjunction with access to more specific climate data and higher traceability for soft commodity supply chains.

To read more about the Climate Transition Risk Survey, download the summary of the results below.