Hello, everybody. Welcome to another edition of C&F Talks. It's a great pleasure to have with me today, Dominika Nowosinska, who's the UK and Europe Market Lead for Environment and Society at Mott MacDonald. Dominika's going to be speaking at our Managing Physical Climate Risk Summit, which is being held in London on the 10th of March. Welcome, Dominika.

Hello. Hello, Maurice. Thanks for having me.

Great to have you with us today. Let's turn to our first question, if we may.

Clearly, with the news that last year was the warmest on record, and I think I read somewhere that January was certainly one of the hottest Januarys on record, clearly there's going to be a huge amount of pressure on the critical national infrastructure, that both financial institutions and corporates rely on for the smooth running of their businesses. How bad is this threat? How worried should the financial community and the corporate community be?

So, I think the threat is now real and visible. A few years back, we were still talking about something that will happen in 10, 15, 20 years. We can now see what's happening around us.

In a way, that does mean that I am seeing people actually changing the narrative to trying to think about solutions, rather than thinking about this is a problem that may or may not happen to me sometime in the future. So, I don't know if people need to be worried anymore. They are already worried.

I think where we need to start thinking, what we need to start thinking about is really what we do about this. In my head, there is no doubt that decarbonisation is a priority. But I do worry that resilience is lagging behind, purely because it used to be seen as tomorrow's problem, not today's.

Maurice

So, if you're, for instance, an investor, and you're looking at your portfolio, what are the sorts of considerations that should be in your mind at the present time as you assess the risks associated with those investing companies?

So, a lot of investors, where worry comes in, is that investors kind of think, where do I start? I've got a portfolio of several hundred assets, several assets, what should I be investing in, in terms of building up resilience first? And I guess this is where the companies like Mott MacDonald have put in a lot of effort to try and think about both system and asset level view. How do you actually address the risks?

I guess where policy and the markets have been, especially around disclosure, have been for a long time, is around disclosing risks to portfolios. So people understand some of those risks already. What is not quite clear is how to then address this, the so what question. So what do we do about those risks? And those are the worries that infrastructure investors, asset owners, asset operators who are looking for funding for resilience come to us with.

How do I start? How do I actually address those risks that I know now have a good sense that for my real estate, for example, overheating is a real issue? So, I know that's the case, but which asset should I go for first? What is the most optimal decision-making route for me to take?

That must be a tricky situation because I guess that data is a challenge, certainly in terms of forecasting, scenario planning and so on.

Do you think that data is improving in this space so that investors of all kinds, and corporates as well, have a good basis on which to make their decisions and indeed their disclosures as well?

So, from a point of view of somebody like myself, at Mott MacDonald we are engineers, we are asset managers looking after infrastructure day-to-day. There's two types of data here. We used to consider weather events as something that we can use the past experience to predict the future. That's no longer true. We have to look at the future scenarios. Working with IIGCC, who will also be part of the event, we are looking at how the data, that climate data, can be factored in.

So, over the last few years we've worked with many climate data providers, we've tested them out and tried to kind of work out exactly where the gaps are, how far the knowledge goes and so on. So, I think that understanding is improving but it's very location-based and very dependent on the type of hazard that you're looking at. So you do have to have done a bit of thinking around your priorities in terms of investment and risk, if that makes sense.

The other side of data is the actual asset data. So that's a challenge for the industry anyway. Existing infrastructure, a lot of information is in people's heads. That doesn't mean we can't move. We have developed physical climate risk assessment methodology that actually looks at how that data can be plugged in to help with decision-making. So, I would say the message is start and then build from that. It's about building that maturity in investment decision-making rather than worrying about having a perfect set of data.

I guess you simply have to work with what you have, don't you? Then improve it as time goes by.

What about the role of government and policy? Are there gaps in this? Is there a need for improved standards, for instance, for infrastructure projects and infrastructure investment to improve resilience?

Huge question and I love it. So about three things in it. I'll probably focus on two.

Yes, there is a need for improved standards. Absolutely, 100%, for two reasons. One is that we need to reconsider what the climate data is telling us and actually then look at the designs that tackle that.

Engineers have been doing it for a while. And here comes the second reason. The standardisation of approaches is important for investors because what we are finding is that hence our method, the PCRAM method being developed, people want to know that resilience has been considered as part of the decision-making process in a way that is easily explained to the financiers or funders.

So, the improvement of standards is absolutely necessary. We are working with various institutions and bodies that are in this space, such as the Institution of Civil Engineers and others, to try and see how that can be improved. But in the meantime, things like physical climate risk assessment methodology can be used to really start bringing that alignment across different assets and across different approaches to give yourself the confidence that physical climate risks have been considered in a consistent manner.

The other point that you mentioned, policy. I think everybody has been saying for years that policy needs to be clear and well-developed, but that's not the world we live in. So, what do we do in the meantime? It's kind of my question.

I think the positive example is the London Climate Resilience Review, where at the city level, the policy has actually been created to look at not only the system level view for the city in terms of critical infrastructure, but also how improving resilience can be an opportunity to improve access to infrastructure, people's living standards. So, I think that this is why when you talk about should people worry about it, I think there is a degree of opportunity in it to actually improve things and future-proof things for our communities in the future.

Yeah, well, that's a very nice positive note, I think. I was just going to end the interview there, but just one final question, if I may.

When you look at the approach in the UK around all these things to do with policy, standard-setting and so on, and road of government, how does that compare with elsewhere in Europe and indeed elsewhere in the world? Are there lessons for us to learn or vice versa?

So yes, I think there are examples elsewhere that we can look at and learn from. So, where I gave example of the City of London, looking at what New York has done is a really good example. There's been quite a lot of work around flooding and actually improving natural habitats as well and kind of improving the way that nature is becoming part of a bit of a more resilient city solution.

So yes, there are some good examples we can build from. Nordic countries have got lots of great examples around, again, about city spaces, how we better design them in the changing climates to make them more resilient and accessible. So yes, there's definitely lots to be learned from. But I do think London is taking some really positive steps as well. So again, it is a mutual learning exercise.

Absolutely. And of course, we'll be looking at London at the conference as well in detail.

Exactly.

So, I think that would be very interesting. But for our viewers, if you'd like to hear more about this issue, which indeed is important for every financial institution and every type of investor, including infrastructure investors, please do attend the summit in person. That's the Managing Physical Climate Risk Summit being held in London on the 10th of March. More information is available on our website, www.cityandfinancial.com. 

Dominika, thank you so much for sharing those thoughts with us today.

Pleasure. I'm looking forward to it.