Research Projects

Financial Impacts of Climate Change

Airports need to build resilience and understand the potential long term impacts of climate change. However, they bump up against costs of implementing projects with resilience elements because there is little aviation specific data regarding the return of investment of such projects and the overall financial risks of climate change. Additionally, as insurance and the availability to retain loans gets more in line with climate risks, airports need to further understand and be able to communicate the financial costs/benefits surrounding climate change and projects that build resilience.

Background (Describe the current situation or problem in the industry, and how your idea would address it.)

There are a number of ACRP resources available to support planning for risks and vulnerabilities, and an ongoing

project to develop benefit/cost analyses for specific projects. Risk assessments for climate change typically have focused on climate risks, rather than financial risk/reward to help airports support and justify climate related/resilience projects. Limited data is available to document financial impacts of climate change, both in terms of acute and sustained events that is specific for airports. Additionally, as insurance and loans increasingly contain climate related risks, airports need to have tools to help justify resilience planning and projects to stay current with these practices.

Objective (What is the desired product or result that will help the airport industry?)

The desired product would include: 1. Compiled data about the costs of climate change and return on investment for resilience projects 2. Context and guidance for airports around financial risks relative to changing industry practices with respect to insurance requirements and loan requirements that integrate resilience/climate change 3. Communication tool kit with presentation and other materials to help justify potential costs/return on investments/mitigation of risks to airport communities, agencies and organizations.

Approach (Describe in general terms the steps you think are needed to achieve the objective.)

The approach would likely need to compile existing data on the known costs for extreme events or other climate related costs, and then an analysis on the types of costs by event type. Additionally, it would need to document the trends in insurance and loan changes that are increasingly tied to climate change risk and proof of integrating resilience. These tasks would help develop a tool kit for understanding the financial risks relative to not integrating resilience into planning and projects, as well as a communications package that would help give airports the resources they needed to work with their partners when integrating and justifying projects.

Cost Estimate and Backup (Provide a cost estimate and support for how you arrived at the estimate.)

$375,000: Large-scale surveys would be needed along with financial analysis to compile a comprehensive look at the

costs of climate change to airports as well and surveys and coordination with insurance/bonding companies to provide context on the changing requirements for insurance and loans relative to climate risks and resilience practices. Additionally, the necessary development of a toolkit and communication protocol would be time-consuming as it would address various stakeholders, roles and responsibilities, presentation templates, etc.

Related Research - List related ACRP and other industry research; describe gaps (see link to Research Roadmaps above), and describe how your idea would address these gaps. This is a critical element of a synthesis topic submission.

• ACRP Report 199: Climate Resilience and Benefit–Cost Analysis: A Handbook for Airports (2019)

• Task Force on Climate-Related Financial Disclosures 2020 Guidance on Scenario Analysis for Non-Financial Companies and 2020 Guidance on Risk Management Integration and Disclosure

• Several Intergovernmental Panel on Climate Change (IPCC) reports and updated climate model

Much of the research to date has focused on providing tools for airports to assess the risk of climate change and the potential for direct impacts on their infrastructure, employees, etc. This research would build upon this and provide a more financially focused approach to help airports justify resilience projects and mitigate risks within the changing landscape where climate change risks are becoming more tied to availability of funds and insurance requirements.

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Idea No. 713