Physical climate risks are material for financial institutions (FIs), with significant implications for portfolio performance, financial stability, and the net-zero transition. Both acute events and chronic hazards—including extreme weather, heat, drought, and sea-level rise—affect FI portfolios through distinct short- and long-term channels. Over time, chronic impacts can erode asset values and returns, raise insurance and operating costs, weaken pension funding positions and sovereign fiscal resilience, and amplify macroeconomic disruptions such as inflation and lower growth. As these risks intensify, investing in adaptation and resilience (A&R) is critical to protecting assets, maintaining economic productivity, and preserving the value of transition investments.

Climate risk management is integral to fiduciary duty

S&P Global forecasts that without A&R measures, physical climate hazards cost real-economy companies an average of 3.3% annually of asset value and up to 28% in the most exposed cases by the 2050s, and CPI estimates projected portfolio losses at 5% globally under warming scenarios of +2°C to +3°C. While a significant proportion of FIs now disclose climate risks, the focus must extend toward actively managing these risks and deploying A&R measures that protect and strengthen the real economy against climate impacts. Expectations for FI action on A&R are also evolving across voluntary frameworks, investor initiatives, and regulatory guidance. Yet, there is no shared view of what constitutes leading A&R practice among FIs or a consistent way to assess progress across institutions.

CPI is bridging this gap with its new report, Responding to Risk: Tracking Financial Institutions’ Progress on Adaptation and Resilience. This deep-dive analysis of eight frameworks relevant to private FIs provides an overview of leading A&R practices that institutions can draw from, highlighting where these frameworks converge. Additionally, it identifies the critical data needed to track FI progress moving forward.

Key findings

Analysis of the selected frameworks identified 26 A&R best practices for FIs. These have been categorized into four key themes: Governance, Strategy and Planning, Risk Management, and Real-Economy and Policy Engagement. Our analysis found convergence around a common A&R agenda, collectively defining best practices, as well as the following insights:

1. Disclosure is now the baseline, but expectations are evolving. The Task Force for Climate-Related Financial Disclosure (TCFD) and aligned frameworks—the ISSB IFRS S2 and CSRD ESRS E1—have established a common foundation for physical climate risk disclosure. Newer FI-specific guidance increasingly expects institutions to move beyond disclosure by developing adaptation plans, integrating physical risk into business decisions, engaging climate-exposed counterparties, and setting adaptation finance targets.

2. Managing portfolio risk requires supporting real-economy adaptation. Leading frameworks recognize that disclosure and internal risk controls alone cannot reduce physical climate risk. Without adaptation measures that increase the resilience of financed assets and economic activities, portfolio risks will continue to grow.

3. Progress on A&R remains difficult to assess. Despite increasing guidance, there is no comprehensive, consistent assessment of how FIs are implementing A&R best practices or progressing over time.

4. Current data and metrics are insufficient to measure resilience outcomes. Existing data does not adequately connect physical climate risk exposure with adaptation actions or resilience outcomes. This limits the ability to evaluate financial sector preparedness, demonstrate the effectiveness of A&R interventions, and identify opportunities to scale adaptation finance.

Next steps for tracking  progress  

Findings from this paper will also be integrated over time into CPI’s Net Zero Finance Tracker (NZFT) dashboard, CPI’s flagship initiative to track 1,500 top global FIs’ action on climate mitigation and adaptation. Building on its existing coverage of climate risk management, the NZFT is well placed to expand its assessment to include A&R metrics and indicators. This can unlock actionable insights for FIs, policymakers and regulators, ultimately driving real-economy impact.

Read the full report to explore our complete findings on best practices for A&R.

Read the report