Climate risk management for international organizations

Ideas for improving strategic planning

Research paper Published 25 June 2021 ISBN: 978 1 78413 477 8

Oli Brown

Associate Fellow, Environment and Society Centre

Taylor Dimsdale

Research Director, E3G

Most international organizations were not designed to deal with the consequences of climate change. An overhaul of risk management, taking specific account of climate-related risks, is therefore needed to ensure the continued operational effectiveness of UN bodies and other agencies. Climate change is likely to have profound impacts on such organizations in the future: increasing demand for their services, undermining programme implementation, and hindering their ability to fulfil their mandates.

This paper is an attempt to ‘climate stress test’ the international system and provide an early measure of its level of preparedness for climate change. The paper maps the current climate risk approaches of roughly two dozen international organizations, based on a review of official documents as well as on interviews with their staff. The paper offers recommendations for how international organizations can continue to achieve their missions by strengthening their climate risk management frameworks.

04 Climate risk management in the international system

International organizations are increasingly highlighting climate risks in their external communications and advocacy. But integration of climate risk considerations into internal systems still often lags behind.

Climate risk management is a subset of ERM that focuses on the challenges to organizational effectiveness and continuity posed by climate change. It is a structured process that helps to incorporate information about climate-related events, trends, forecasts and projects into decision-making and long-term strategic planning.36

Done well, climate risk management is both an art and a science: it uses the best possible data without allowing uncertainties to slow action; it identifies what is known, what is unknown and what cannot be known.37 But whereas ERM overall has gained ground among international organizations over the past 15 years, climate risk management is still very much in its infancy. This is despite its potentially profound consequences for the operations, mandates and effectiveness of international organizations, and despite the fact that climate change could exacerbate several of the ‘standard risks’ faced by international organizations – these include fiduciary, legal, reputational, operational and information risks.

External dimension: setting the agenda

All the organizations examined for this paper (listed in Table 1 below) mentioned climate change in their outward-facing reports and advocacy documents, which help to set the agenda about climate risk in their respective sectors. Many organizations also provide essential research and data that are used by a wide range of public and private stakeholders. International organizations have made a great deal of progress in recent years in integrating climate risk into their external communications. For example, the International Monetary Fund (IMF) publishes the World Economic Outlook twice a year and has included a chapter on climate change since 2018. The IMF also devoted the December 2019 issue of its magazine Finance & Development to the economics of climate change. The Organisation for Economic Co-operation and Development (OECD) has also published extensively on climate change, and has teamed up with the International Energy Agency to form an expert group on the issue.

In addition, all of the organizations reviewed mentioned climate change in their strategic planning documents – mostly in the sense of describing the larger context within which they were operating. The Food and Agriculture Organization of the United Nations (FAO), for example, mentions ‘addressing climate change and the intensification of natural hazards’ as one of the 10 challenges most pertinent to its work. There is widespread recognition among international organizations that climate change has implications for their areas of work. Several international organizations have also set up climate change units or programmes, and provide analysis or advice to governments or local communities. For example:

The World Health Organization (WHO) publishes data and analysis on the links between climate change and health impacts, including case studies on climate change and health, and a series of profiles on climate change and health in island states. WHO also coordinates reviews of the scientific evidence on the links between climate change and health.
The WFP provides analysis highlighting the links between food security and climate risks, as well as analysis on the present and future impacts of climate change on food security and nutrition. In conjunction with the UK’s Met Office, it has also developed a food insecurity and climate change vulnerability map.38
The World Bank has long recognized climate change as a major risk to positive development outcomes. The bank publishes data on various climate change indicators, provides extensive climate and disaster risk screening tools,39 and reports on extreme climate scenarios. For example, in 2012 they published Turn Down the Heat: Why a 4°C Warmer World Must be Avoided.40
The FAO has developed an institutional climate change strategy and action plan, and has committed to integrate this work across all its strategic objectives, aiming to achieve three mutually reinforcing outcomes: (a) enhanced national capacity on climate change through FAO leadership on the provision of technical knowledge and expertise; (b) improved integration of food security and nutrition, agriculture, forestry and fisheries considerations within the international agenda on climate change; and (c) strengthened coordination and delivery of FAO work on climate change.41

Collectively, such external-facing efforts constitute a ‘decision support system’ for political decision-makers. This helps governments plan for the future, sets a common understanding of the climate challenge and facilitates the sort of cross-border collaboration that is a prerequisite for adequately managing climate risk, given that it is a global ‘public goods’ problem.

Internal dimension: managing climate risks

On the other hand – and while there has been undoubted progress in the past decade – international organizations are not yet incorporating climate change into their internal strategic planning and risk management systems with the levels of enthusiasm that are implied in their external communications on the issue.

Just over two-thirds (16) of the international organizations surveyed for this paper include indicators on climate change in their strategic planning (see Table 1). Climate change is, for example, mentioned as one of four cross-cutting themes in the FAO’s new Strategic Framework 2022–2031, which was presented to member states in December 2020.42

Fifteen of the 22 organizations have a full ERM policy. However, only eight of those make their risk registers publicly available. And only six list climate risks such as flooding, storms or weather-induced displacement as risks that need to be managed. The United Nations Development Programme (UNDP), for example, lists climate change and natural disasters as one of 66 ERM risk subcategories.43 Another UN agency, the Department of Political and Peacebuilding Affairs (DPPA), lists climate change as one of the global challenges presenting key risks for the organization.44 In 2020 UNHCR added climate change to the list of cross-cutting major risks (now numbering 17) shaping the agency’s work. Its risk register notes that the risk revolves around ‘failure to adapt our strategic positioning, internal processes and operating posture in response to climate change’.45 In 2021 UNHCR endorsed a strategic framework for climate action, noting that states with the highest number of refugees per head of population tend to be more vulnerable to climate change impacts.46

However, according to one interviewee, even where international organizations do consider climate risk, this often seems to be more of a cursory ‘box-ticking’ exercise than a serious attempt to include climate change in ERM systems. For example, climate change is mentioned in WFP’s corporate risk register, but only in terms of whether staff have sufficient skills to engage in climate and disaster risk reduction programmes.47 A further seven organizations do not make their risk assessments publicly available, so it is not possible to gauge the weight they attach to climate risks.

Table 1. Overview of international organizations’ approaches to climate risk in strategic planning

International organization	Mentions climate change in strategic planning?	Includes indicators on climate change?	Has an ERM system?	Climate risks mentioned in publicly available risk register?
Disease pandemics
World Health Organization	Yes	Yes	Yes	Not publicly available
Food security
World Food Programme	Yes	Yes	Yes	Yes
Food and Agriculture Organization of the UN	Yes	Yes	Yes	Not publicly available
Economic shocks and trade
International Maritime Organization	Yes	Yes	Yes	No
World Trade Organization	Yes	No	No	No
International Monetary Fund	Yes	No	No	No
World Bank	Yes	Yes	Yes	Not publicly available
Organisation for Economic Co-operation and Development	Yes	No	Yes	No
UN Department of Economic and Social Affairs	Yes	Yes	No	No
Movement of people and migration
International Organization for Migration	Yes	Yes	Yes	Not publicly available
UN High Commissioner for Refugees	Yes	Yes	Yes	Yes
Energy supply shocks
International Energy Agency	Yes	Yes	No	No
International Renewable Energy Agency	Yes	No	No	No
National and international security
UN Security Council	No	No	No	No
UN Department of Political and Peacebuilding Affairs	Yes	No	Yes	Yes
Development, disasters and the environment
UN Framework Convention on Climate Change	Yes	Yes	Yes	Yes
UN Environment Programme	Yes	Yes	No	No
World Meteorological Organization	Yes	Yes	Yes	Yes
UN Office for Disaster Risk Reduction	Yes	Yes	Yes	Not publicly available
UNICEF	Yes	Yes	Yes	Not publicly available
UN Development Programme	Yes	Yes	Yes	Yes
UN Women	Yes	Yes	Yes	Not publicly available

Source: Authors’ compilation from publicly available documents supplemented by interviews with representatives of international organizations.

Many of the barriers to more effective management of climate risks echo those affecting ERM systems in general: organizational ‘blind spots’ in relation to risk, path dependency in strategic planning, governance structures that do not incentivize professional risk management, and the perception that risk management constrains rather than facilitates action. The gradual nature of slow-onset climate change impacts such as desertification and rising sea levels means that the cumulative impact of these changes over time may be missed. Decision-making is often based on scenarios that may be opaque and unquestioned; moreover, such scenarios are often linear and conservative, and fail to identify the key sectors that are at risk. In analysing future scenarios, organizations may fail to anticipate the cascading impacts of climate change, which can ripple across interconnected sectors in significant but unpredictable ways. At the same time, the multifaceted aspects of climate change make it hard to address impacts across sectors in the international system, especially given that the system is segmented into individual silos of expertise and programming. This encourages a poverty of ambition when it comes to guarding against future climate risk.

So, what can organizations do to better integrate climate risk into their risk management processes and strategic planning?

Climate risk assessments

The first step to more effective climate risk management is to improve climate risk assessment at the strategic level of the organization (as opposed to improving it within individual project-level activities). A variety of methods exist for conducting such assessments: these include expert judgment, sensitivity studies, impact studies, participatory assessment, risk mapping, scenario analysis and so on. What is important, however, is that strategic planners and risk officers are able to conceptualize and characterize climate risks in ways that give decision-makers the information they need to make informed judgments.

Climate change is not a linear process, and there are several potential climate ‘tipping points’ of concern (such as changes in the Gulf Stream, the accelerated loss of polar ice caps, or the dieback of the Amazon rainforest) that could trigger runaway impacts over relatively short time scales. Climate risk assessments therefore need to consider the full range of plausible outcomes.48 Meanwhile, analysing potential risks in terms of how they cascade across systems can help to identify both the complex relationships among risks and the often surprising ways in which challenges in one sector can affect others.49

Box 1. UNHCR’s Sahel Predictive Analysis Initiative

The Sahel Predictive Analysis Initiative is a pilot initiative launched in 2019 by UNHCR. It aims to harness artificial intelligence, statistical algorithms and machine-learning techniques for better scenario forecasting in the Sahel region of Africa. The initiative focuses on the interconnected challenges of displacement, climate risks, food insecurity and increased violence. It seeks to encourage whole-of-system engagement beyond the humanitarian sector to bring in diverse, cross-sector capacities from across the UN system to try to anticipate future events in a holistic manner.50

Risk registers

Climate risks can be documented in a risk register or risk log, and prioritized in terms of their likelihood and impact. Successful risk management should be an organization-wide exercise involving all staff. It should not only be a top-down process, as project staff are often best placed to understand which risks threaten the success of their work.

Box 2. Strategic risk management at UNDP

The risk management system employed by UNDP requires every project team to submit annual risk logs as part of the corporate internal planning process. However, the experience of the COVID-19 pandemic that began in 2020 has forced a recognition that UNDP needs a new approach to deal with multidimensional risk. UNDP is now designing a strategic risk management system that helps staff analyse and manage risks, and goes beyond a series of ‘tick boxes’ by making risk logs less static while improving processes for escalating decisions up the chain of command.51

Risk appetite

Having a clear view of the potential entity-level risks associated with climate change enables an informed discussion about risk tolerance and risk appetite: i.e. what kind and degree of risks do leaders find acceptable in the pursuit of institutional goals? This requires an honest discussion about programme criticality – which services are so central to an organization’s mission that the organization should accept a higher degree of risk, if necessary, in delivering them? Such assessments also help inform the related conversation: which investments in time, effort and funds are needed to enable the development of more elaborate risk mitigation measures that would enable critical functions to continue?52

Box 3. Risk appetite metrics at WFP

WFP’s strategic plan includes the goal of building ERM into its country-level strategic planning, so that risk appetite can be articulated for the different countries in which WFP operates. To this end, the organization has developed risk tolerance and risk appetite measures and thresholds for designated ‘higher-risk’ countries. Risk management and categorization are carried out by country offices based on their own operations, enabling them to build yearly plans around these categories.53 However, none of this is possible without a positive risk culture that encourages openness and the discussion of real strategic issues. Everyone, from the leadership down, has a role in establishing that culture.54

A sense of the range of climate-related risks facing an organization, as well as the range of acceptable risks, allows the design of risk mitigation measures. The international community is well versed in the language of climate adaptation, but also needs to turn its attention to building organizational climate resilience.

Box 4. Country Partnership Frameworks at the World Bank

The World Bank Group Action Plan on Climate Change Adaptation and Resilience, launched in 2019, allocated $50 billion over five years to help countries shift to systematically managing and incorporating climate risks and opportunities across policy planning, investment design and project implementation. The action plan calls for the integration of climate risks within each stage of the group’s operation design, project implementation, and performance monitoring and evaluation. Any new Country Partnership Framework is supposed to integrate risk considerations into country development priorities.

Changing the risk culture

Effectively implementing risk mitigation measures might also involve rethinking staffing and policies around human resources – i.e. getting the right people to help an organization ‘think differently’.

Box 5. Innovative human resource management

The United Nations Environment Programme (UNEP) is looking to encourage greater agility within the organization by supporting ‘intrapreneurs’. Intrapreneurs are those people already in the organization who have a vision for how things can be improved, who understand the system, and who can navigate the institutional politics to make things happen. The challenge is to encourage these kinds of staff while still aligning them within the overall vision of the organization.55 Meanwhile, UNDP is hiring people with uncommon skill sets, such as a ‘head of exploration’, ‘horizon scanners’, ‘future thinkers’ and ‘network specialists’. This is a deliberate way of infusing new skills and experiences into the organization to challenge received wisdom. UNDP has also created ‘Accelerator Labs’ in more than 60 of its country programmes. These Accelerator Labs are three-person teams that develop innovative solutions to local problems and that also develop the necessary skills to address them in situ.56

Risk mitigation also entails being open to a range of different views and to public participation in strategic planning processes. UNDP has been engaging in open-access discussions around the future of the organization, through SparkBlue, an online public engagement platform.57 A SparkBlue thread on UNDP’s 2022–2026 Strategic Plan ran in November–December 2020, and involved more than 400 people trading ideas on how UNDP should evolve to meet new challenges. Widespread public participation is important, because it maximizes the number of points of view that inform strategic planning and avoids the dangers of ‘groupthink’ and path dependency.

Monitoring and evaluation

Monitoring and evaluating the accuracy of climate risk assessments and the impact of climate risk mitigation measures are essential if an organization is to learn from and improve the overall process. Another necessary element is to ensure that risk management is checked, verified and updated. Back in 2010, the UN’s Joint Inspection Unit (JIU) recommended a ‘three lines of defence’ approach to structured risk management as one of the 10 proposed benchmarks for the adoption of ERM.

Under this approach, the first line of defence comprises the units or individuals who have the responsibility to ‘own and manage’ a particular risk, who are closest to the issues and who are in charge of putting mitigation measures in place. The second line of defence consists of those units within the organization that oversee or specialize in risk management and provide internal quality control. The third line of defence consists of external bodies that provide independent assurance. In the case of climate risk management, an organization such as the UN Framework Convention on Climate Change (UNFCCC), or a bespoke climate risk management entity within the UN system, could play an important role not only in improving risk management among specific institutions but also in encouraging better risk management at a systemic level and even in underpinning a larger reform agenda for the UN as a whole.58

Learning and knowledge-sharing

Finally, it is important that UN agencies, funds and programmes share and learn the lessons concerning the challenges they face, and what is working for them, so that the overall process of risk management is iterative and cyclical.

Box 6. The UN’s Risk Management Forum

Several mechanisms for the sharing of risk management experience in international organizations already exist. For example, the UN Strategic Planning Network is an informal grouping of strategic planning professionals from across the UN system who meet regularly to share ideas on strategic planning. There is also the OECD High Level Risk Forum, an annual meeting of risk managers, which provides a platform for discussion of the most critical risks facing the public and private sectors and for sharing ideas on how to address these risks.59

In 2018, the UN’s High-Level Committee on Management (HLCM) agreed on the need for better system-wide harmonization of risk management practices, and created a Risk Management Task Force. Over the past couple of years, the task force has worked to institutionalize better system-wide risk management. It has issued a reference maturity model for risk management (in other words, a model of what ‘mature’ institutional risk management should look like) as well as guidance papers on risk appetite, embedding risk management, and managing risk in the field and in decentralized organizations.60 In 2021 the UN decided to upgrade this task force into a permanent forum for sharing knowledge and developing new material, serviced by a small secretariat.61

Travis, W. R. and Bates, B. C. (2014), ‘What is Climate Risk Management?’ in Climate Risk Management (2014), Volume 1, 2014, pp. 1–4, doi: https://doi.org/10.1016/j.crm.2014.02.003.

Born and Mabey (2016), United we stand: Reforming the United Nations to reduce climate risk.

UK Met Office (undated), ‘Food Insecurity & Climate Change’, http://www.metoffice.gov.uk/food-insecurity-index.

World Bank (undated), ‘Welcome to the World Bank Climate and Disaster Risk Screening Tools’, https://climatescreeningtools.worldbank.org.

World Bank (2012), Turn Down the Heat: Why a 4°C Warmer World Must be Avoided, report for the World Bank by the Potsdam Institute for Climate Impact Research and Climate Analytics, http://documents1.worldbank.org/curated/en/865571468149107611/pdf/NonAsciiFileName0.pdf.

Food and Agriculture Organization of the United Nations (FAO) (2017), FAO Strategy on Climate Change, Rome: FAO, http://www.fao.org/3/i7175e/i7175e.pdf.

FAO (2020), Outline of the Strategic Framework 2022–2031 and Outline of Medium Term Plan 2022–25, 165th Session of Council, CL 165/3, Rome: FAO, http://www.fao.org/3/nd976en/nd976en.pdf.

United Nations Development Programme (UNDP) (2018), Enterprise Risk Management (ERM) Policy and Procedures (approved November 2018), New York: UNDP, https://popp.undp.org/UNDP_POPP_DOCUMENT_LIBRARY/Public/AC_Accountability_Enterprise%20Risk%20Management%20Policy.pdf.

United Nations Department of Political and Peacebuilding Affairs (DPPA) (2020), 2020 Mid-Year Risk Register – DPPA, New York: DPPA, https://dppa.un.org/sites/default/files/2020_erm_for_mya.pdf.

UNHCR (pending publication), Summary of Strategic Risks to UNHCR, Geneva: UNHCR.

UNHCR (2021), Strategic Framework for Climate Action, Geneva: UNHCR, https://www.unhcr.org/604a26d84/strategic-framework-for-climate-action.

WFP (2019), Update on the implementation of the 2018 Enterprise Risk Management Policy and WFP’s Anti-Fraud and Anti-Corruption Action Plan (2018–2020).

Born and Mabey (2016), United we stand: Reforming the United Nations to reduce climate risk.

UN System Chief Executives Board for Coordination, High-level Committee on Programmes (2017), Adopting an analytical framework on risk and resilience: a proposal for more proactive, coordinated and effective United Nations action.

UN System Chief Executives Board for Coordination, High-level Committee on Programmes (2019), Report of the High-level Committee on Programmes at its thirty-eighth session, 19 December 2019, CEB/2019/6, New York: UN, https://unsceb.org/sites/default/files/imported_files/CEB_2019_6%20%28HLCP%2038%29_0.pdf.

Author interview with international organization representative; UNDP (2020), Strategic Plan 2022–2026 – SparkBlue consultations, 16 September to 16 October 2020: Synthesis of key points, New York: UNDP, https://www.sparkblue.org/system/files/2020-10/SP%202022-25%20SparkBlue%20Consultations%20-%201st%20Synthesis%20Report-2.pdf.

Stoddard, A., Haver, K. and Czwarno, M. (2016), NGOs and Risk: How international humanitarian actors manage uncertainty, February 2016, Humanitarian Outcomes, InterActive, https://www.humanitarianoutcomes.org/sites/default/files/publications/ngo-risk_report_web.pdf.

WFP (2019), Update on the implementation of the 2018 Enterprise Risk Management Policy and WFP’s Anti-Fraud and Anti-Corruption Action Plan (2018–2020).

Cheshire, I. and Manzoni, J. (2017), Management of Risk in Government: A framework for boards and examples of what works in practice – a Non-Executives’ Review, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/584363/170110_Framework_for_Management_of_Risk_in_Govt__final_.pdf.

Author interview with international organization representative.

See http://www.SparkBlue.org.

Born and Mabey (2016), United we stand: Reforming the United Nations to reduce climate risk.

For more information, see OECD (undated), ‘Risk governance’, https://www.oecd.org/gov/risk.

UN System Chief Executives Board for Coordination (2019), ‘Reference Maturity Model for Risk Management (38th session, Oct 2019)’, https://unsceb.org/reference-maturity-model-risk-management-38th-session-oct-2019.

UN Economic and Social Council (2021), Annual overview report of the United Nations System Chief Executives Board for Coordination for 2020, 1 March 2021, E/2021/47, https://unsceb.org/2020-annual-overview-report.

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