Due diligence phase

Executive Summary

Section 6 guides FIs through embedding climate risk management into due diligence processes. Covering climate risk assessment, financed emissions, data collection, and materiality quantification. It emphasises the importance of structured, proportional, and forward-looking approaches to identifying and evaluating climate-related risks at both asset and portfolio levels.

Physical risk assessment focuses on client location, exposure, vulnerability, and adaptive capacity. Transition risk assessment focuses on high-emitting and hard-to-abate sectors, using scenario analysis and guidance to evaluate policy, technology, market, and reputational risks. Materiality quantification translates complex climate risks into clear, auditable metrics, supporting FI decision-making, regulatory alignment, and client transition journeys. Section 6 is especially useful for risk teams, credit officers, sustainability specialists, and auditors seeking to embed climate risk into due diligence and portfolio management.