Climate Measurement Standards Initiative

Developing open-source technical business and scientific standards for climate physical risk projections of future repair and replacement costs of residential and commercial buildings and infrastructure in Australia.

Reducing risks
& costs

of climate-related disclosures for insurers, asset owners and banks, consistent with the TCFD

scientific advice

on approaches, methods, assumptions, and data for estimating future costs that are disclosed

Developing a shared understanding

of climate science, impacts on extreme events and data requirements

Initiative Objectives

Aerial photo of water crashing over dry land
  • Provide consistent and comparable financial disclosure guidelines under TCFD recommendations for producers and users of such guidelines.
  • Develop reference scenarios that provide relevant details on the recommended climate models and climate impacts for extreme events.
  • Support wider disclosure of climate change scenarios by the banking, insurance and asset owner sectors in Australia.
  • Develop a framework for consideration by regulators, governments and other stakeholders to support the assessment of disclosures and financial stability.
  • Present a roadmap for future research and development aligned with disclosure requirements.

Why this is Needed

The Task Force on Climate-related Financial Disclosures (TCFD), launched in 2015 by the Financial Stability Board is quite broad in its guidance on how to assess and disclose climate-related risk. This has the potential to lead to disclosures which are not comparable, consistent or aligned across reporters and to crucial Australian factors. The Climate Measurement Standards Initiative (CMSI) was formed to bridge this gap for asset owners, banks, insurers and traders of private and residential property in Australia, and for institutions whose role it is to oversee financial and community stability. The CMSI is a first step to providing Australia a common understanding of financial disclosures regarding future damage to residential and commercial properties by climate-related phenomena.

Aerial photo of the Daintree Rainforest

The CMSI has completed the first phase of its work. CMSI appointed a finance committee, a science committee and an application committee. More than 120 industry experts participated in the development of the first reports. 

The finance committee has considered resilience, portfolio assumptions, accounting items, emission scenarios, timeframes, hazards, geographic regions and uncertainties. The committee has published a guide for Australian banks, general insurers and asset owners, titled ‘Scenario analysis of climate-related physical risk for buildings and infrastructure: Financial disclosure guidelines’.

The science committee has advised on relevant scientific methods, data and uncertainties for climate scenario analysis. The committee has assessed scientific gaps and needs, outlined a vision for reducing uncertainties and increasing confidence, and has proposed a roadmap for realising the vision.

The science committee has published a report that describes the basis for producing climate projections and scenarios. The report includes details on likely changes to annual-average temperature, rainfall and sea level, and to other hazards such as bushfires and tropical cyclones. The report ‘Scenario analysis of climate-related physical risk for buildings and infrastructure: Climate science guidance’ is available here.

The applications committee was formed to provide feedback on the practicality of the scientific and financial disclosure guidelines, and especially the completeness of the technical specifications for scenarios. The feedback is forming the basis for additional guidance and next steps in the program.

How it Works

As an industry-led collaboration between insurers, banks, scientists, regulators, reporting standard professionals, service providers and supporting parties, the Climate Measurement Standards Initiative (CMSI) increases/builds confidence by providing standards for disclosure. The project integrates the disciplines of climate science, hazard science, catastrophe modelling and financial modelling to provide a set of open-source standards for the disclosure of climate-related physical risks for companies with financial interests in physical assets, including residential and commercial buildings or other infrastructure in Australia.

These voluntary standards are:

  • Comparable between insurers, banks and asset owners
  • Supported by scientific evidence and advice from Australia’s leading climate experts
  • Provide guidance for program developers, model vendors and service providers to provide advice to the industry, thereby removing the “black box” problem
  • Enable widespread adoption
  • Focus R&D on what is actually needed

Our Partners

The initiative is being coordinated by a steering group led by Climate-KIC Australia, the National Environmental Science Program, Earth Systems and Climate Change Hub and a group of industry partners, these include QBE, Suncorp, IAG, RACQ, National Australia Bank, Westpac, Commonwealth Bank of Australia, HSBC Australia, Munich-Re, Swiss-Re, Leadenhall CP, MinterEllison and Investor Group on Climate Change. Technical support has been provided by the Institute for Sustainable Futures, UTS.