BBVA Measures and Shares Climate Physical Risk Assessments with its Clients

BBVA Adapta provides a consistent view of physical climate risk exposure across the different markets where the bank operates. BBVA already shares these assessments with its clients to help them understand how physical climate risks could affect their assets and operations, identify adaptation and resilience measures, and guide future investment planning.

“Physical climate risk is already having a tangible impact on the real economy, affecting regions, industries and asset classes in different ways. Developing our own methodologies enables us to better understand these risks, manage our exposure, and support our clients as they take steps to reduce the vulnerability of their operations,” said Antonio Blanco, Head of Climate and Sustainability Risks at BBVA.

Physical climate risk falls into two categories: acute risk, which is associated with extreme weather events such as floods, wildfires and storms; and chronic risk, which relates to gradual changes such as rising temperatures, shifting precipitation patterns, water scarcity and sea level rise. This classification is reflected in the standards issued by the International Sustainability Standards Board (ISSB).

From climate risk to economic impact

Physical climate risk affects the economy through both direct and indirect channels. At the microeconomic level, it can damage roads, factories, homes, power grids and crops. It can also disrupt business operations and critical infrastructure, affecting supply chains, suppliers, prices and delivery times.

At the macroeconomic level, these impacts can reduce economic activity and productivity, put upward pressure on prices, increase the vulnerability of sectors such as agriculture, energy, transportation and tourism, and drive up insurance costs or reduce insurance availability in certain areas.

Measuring physical climate risk is both complex and data-intensive, requiring the integration of three key elements: projecting climate hazards, assessing the exposure of assets and operations based on their location, and evaluating their vulnerability or ability to withstand those hazards.

BBVA Adapta develops proprietary models to forecast climate hazards under different scenarios and combines them with the geolocation of exposed assets—such as infrastructure, facilities, crops, business activities and mortgage portfolios—and asset-specific characteristics that determine their vulnerability. This approach makes it possible to estimate potential damage, business disruption and losses in asset value, while also identifying differences across sectors, regions and time horizons.

Adaptation: a financing challenge

The growing impacts of climate change also present a major financing challenge for climate adaptation. Although investment in climate adaptation has increased, it remains well below what is needed. Recent figures[1] place it at between $65 and 75 billion per year, globally, compared with estimated annual needs of $310 billion to $365 billion in developing countries by 2035.

Looking beyond 2030, the challenge becomes even greater, with global adaptation financing needs estimated at between $500 billion and $1.3 trillion annually, depending on the level of ambition. This would require increasing current funding levels by a factor of eight—or even as much as twenty.

Closing this gap will require not only mobilizing additional financing but also helping businesses and public authorities identify, prioritize and structure investments that strengthen resilience. In this context, physical climate risk analysis is becoming a critical tool for translating an understanding of climate exposure into informed investment and financing decisions.

BBVA Global Banking Partner for COP31

BBVA announced its participation as Global Banking Partner of the United Nations Climate Change Conference (COP31), which will run from November 9 to 20 in Antalya, Türkiye. Through this partnership, the bank will work alongside the COP presidency and the United Nations to continue championing financing for the energy transition and scale up the implementation of solutions supporting the transition to a low-carbon economy.