N°24-91: Harnessing AI to Assess Corporate Adaptation Plans on Alignment with Climate Adaptation and Resilience Goals

The extent to which firms are adapting to climate change and building resilience to climate and nature-related risks is vital information for financial institutions, regulators and governments. For financial institutions, this can guide risk pricing, product development, engagement and stewardship and capital allocation decisions; all vital to scaling up private adaptation and nature finance. Yet currently no framework or tool exists to assess corporate adaptation and resilience alignment and there is little guidance available for firms to improve disclosure. We build on established sustainability disclosure frameworks and propose a new Adaptation Alignment Assessment Framework (A3F) to analyse corporate adaptation and resilience progress. We combine the framework with a natural language processing model and provide an example application to the Nature Action 100 companies. The pilot application demonstrates that corporate reporting on climate adaptation and resilience needs to be improved and implies that progress on adaptation alignment is limited. Further, we find that firms are already reporting on environmental impact but integration of nature-related risks and dependencies is low, suggesting further engagement is needed with the Taskforce for Nature-Related Disclosures. However, in general, the paper demonstrates the feasibility and practicality of assessing large swathes of corporate reporting through AI to gain insights on company resilience alignment. The framework developed also provides guidance to firms on adaptation and resilience disclosure.