Why Physical Climate Risk is the Next Big Shift in Finance

Backstage at Risk Evolve, Ellie from the Centre for Financial Professionals speaks with Manuel Vicente, VP Commercial at Climate X. Manuel draws on more than two decades in financial services to discuss how Climate X is helping institutions turn climate risk into tangible business outcomes.

He explains how market leaders are not just dabbling in climate risk—they’ve embedded it across operations, from stress testing to credit provisioning. Those ahead of the curve have invested in data, models, and people over multiple years, enabling them to pivot from internal risk management to external client engagement.

Manuel highlights three core industry challenges: the need for granular and scalable data, full transparency into model inputs and outputs, and integrating these new risk models into model risk management (MRM) frameworks. The latter, he notes, is the most difficult but essential for evolving beyond box-ticking exercises.

What stands out is how successful institutions are translating complex climate models into meaningful metrics for clients—like business disruption and capex decisions—bridging climate resilience with profitability. As Manuel puts it, adaptation finance is the next evolution of green finance, and the industry is just beginning to unlock its full potential.