The Investor Group on Climate Change (IGCC) has called attention to the urgent need for adaptation measures following the release of the country’s first National Climate Risk Assessment and 15 new national climate risk datasets.
The IGCC, representing institutional investors, stated that the government’s move is a necessary step to enable private capital to support climate adaptation and resilience initiatives.
Rebecca Mikula-Wright, CEO of IGCC, noted that climate-related losses are expected to affect investment returns.
“Although the new findings are confronting, the high quality assessment is absolutely necessary, so it’s good to have this released,” she said. “Investors have been crying out for this systemic, nation-wide risk assessment because it starts to get everyone on the one page, and that’s the first step for making good decisions about how to invest to protect our assets, communities, homes, and businesses.”
The National Climate Risk Assessment projects that more than 1.5 million Australians living in coastal regions could be exposed to increased risks from rising sea levels by 2050.
The report also anticipates that climate-related events – including floods, cyclones, heatwaves, droughts, and bushfires – will become more frequent and severe.
These developments are expected to have direct implications for the insurance industry, particularly in underwriting, pricing, and claims management.
The assessment evaluates three global temperature scenarios – above 1.5°C, 2°C, and 3°C – and notes that Australia has already surpassed the 1.5°C warming threshold.
The findings suggest that further warming could lead to a rise in heat-related fatalities, especially in major cities such as Sydney and Melbourne.
Additionally, the report estimates that property values could collectively decline by over $600 billion due to climate impacts, with further strain anticipated on infrastructure, water quality, and public health.
The IGCC has outlined several recommendations for policymakers, including amending the Climate Change Act to require regular updates to the National Climate Risk Assessment and the National Adaptation Plan.
“It’s crucial to update the Climate Change Act to require regular updates to the risk assessment and adaptation plan. That would lock in continued improvement from today’s start,” Mikula-Wright said.
The group also urges immediate allocation of resources for priority actions, such as developing economic and actuarial models to identify effective adaptation policies and working with Treasury on an adaptation finance strategy.
Additional proposals include updating the Clean Energy Finance Corporation’s investment mandate to address physical climate risks and expanding the sustainable finance taxonomy to cover adaptation and resilience.
IGCC recommends that investors incorporate the new climate risk data into their investment processes, including risk management, scenario analysis, and economic modelling.
Investors are also encouraged to align their portfolios with national resilience objectives and to build expertise in managing climate-related risks.
For government, the recommendations extend to investing in scientific research, reviewing regulations such as the National Construction Code and land-use planning, and ensuring that specialist investment vehicles explicitly include adaptation and resilience in their mandates.
While the National Adaptation Plan provides a framework for future action, IGCC notes that it does not mandate regular updates or provide new funding for an action agenda, which is anticipated by the end of 2026.
The group emphasises the need for a comprehensive approach to mobilise private investment in adaptation, highlighting the importance of collaboration between the public and private sectors to protect Australia’s assets and economic stability.
