Measuring resilience requires more than one perspective

One of the challenges in climate risk is that no single discipline has all the answers.

Engineers can model how assets respond to floods, fires, storms and extreme heat. Climate scientists can project how the climate and the drivers of extreme weather will change over time. Physical risk analysts like XDI can turn this into damage, disruptions and cost impacts.  And financial institutions can assess the implications for portfolios and markets. Companies can disclose how they are planning and investing to adapt.

Yet resilience sits at the intersection of all of these.

To understand whether a company is resilient, we need to understand both the risks it faces and the actions it is taking in response. We need to know whether adaptation plans are relevant to the hazards that matter and will deliver material risk reduction. We need to understand whether investments in resilience are likely to reduce future damage and disruption to levels acceptable to investors and stakeholders. And we need a way to compare outcomes across companies, sectors and regions.

No single organisation can do that alone. That recognition became the starting point for ResilienceArc.

ResilienceArc - an NGO, university and private sector collaboration - was developed through a partnership between Arc, Earth Capital Nexus at the London School of Economics (LSE), and XDI (Cross Dependency Initiative). Each partner brings a different but complementary capability to the challenge of measuring corporate resilience.

At XDI, our focus has been on quantifying physical climate risk and resilience. For nearly two decades we have worked to understand how climate hazards translate into damage, disruption and financial impacts across real-world assets and operations, and how resilience measures can reduce those impacts.

Earth Capital Nexus (LSE)  brings expertise in resilience assessment methodologies and using AI to analyse corporate disclosures, helping identify evidence of governance, adaptation planning, implementation and resilience-building activity.

Arc brings these methodologies together through an open-access platform designed to improve transparency, comparability and accessibility for investors, companies and other decision-makers. Together, we have sought to address a question that is becoming increasingly important:

How do we know whether a company is genuinely becoming more resilient?

The climate risk community has made enormous progress in understanding exposure to physical climate hazards. But exposure alone does not tell us whether organisations are prepared for the future. Nor do corporate commitments, targets or disclosures tell us whether the most material risks are being addressed.

Resilience requires both perspectives. ResilienceArc was created to connect the dots - helping users understand not only where climate risks exist, but whether companies are building the resilience needed to withstand, adapt to and recover from them. By connecting quantified physical climate risk analysis with evidence of adaptation and resilience action, the platform aims to provide greater transparency into how companies are managing the challenges of a changing climate.

Because the next frontier is no longer simply identifying climate risk, it is understanding whether companies are prepared.

Dr Karl Mallon.