Schroders And Cornell Launch Climate Risk Framework

As part of a major move to improve climate risk resilience in high-risk sectors, Schroders, a global asset manager, has collaborated with Cornell University's Global Labor Institute (GLI) to introduce a new stewardship framework. The framework is aimed at sectors like apparel, food, and construction—sectors that are increasingly vulnerable to the financial and operational risks of climate change.

The company's new framework is directed at investors and businesses to help them navigate the increasing complexities of climate disruptions. As increasingly severe and frequent weather events become the primary driver, Schroders cautions against the growing importance of financial loss and stranded assets. The fashion sector, in fact, is likely to be among the most vulnerable. As per early studies by Schroders and Cornell GLI, global warming may decrease the operating earnings of large fashion producers by 5% or more because of extreme weather disruptions. In addition, the lack of strong climate adaptation measures may cost four prominent apparel-producing countries a whopping $65 billion in export revenues by 2030.

The key to the framework is its focus on adaptation—a critical yet underemphasized component of climate resilience. While the majority of corporate initiatives have historically centered on mitigation or relocation initiatives, Schroders and Cornell emphasize that both of these strategies are inadequate in addressing long-term sustainability. The new framework instead promotes stringent adaptation initiatives, ranging from complete climate risk assessments to infrastructure development and supplier support mechanisms.

Katie Frame, Active Ownership Manager at Schroders, highlighted the urgency of the situation saying that the financial impacts of inaction on climate change are already starting to be felt. "Climate change-related extreme weather risks financial materiality for a lot of brands and industries," she said. Frame highlighted that increased temperatures and flooding are now impacting investment returns and client results, especially in the clothing, food, and construction sectors.

The stewardship approach urges investors to play an active role in engaging with firms, compelling them to pursue proactive adaptations. Some of these are equipping infrastructure with a capacity to withstand climate shocks, implementing protection measures for workers, and ensuring responsible sourcing practices in supply chains. The advice also underscores the need for finance and capacity building—particularly in suppliers who are based in exposed and climate-vulnerable areas.

Jason Judd, Executive Director of Cornell's Global Labor Institute, underlined the important link between climate resilience and the protection of labor. "Physical climate risk and extreme weather pose severe health risks for garment workers that translate into material risks for brands," he stated. Judd indicated that investments to protect supply chains and workers need to be viewed as key to ensuring the protection of social welfare and business performance.

The guidance represents a major shift in the manner that businesses are supposed to address climate risk. Instead of waiting for things to be disrupted, proactive preparations are now emphasized. Schroders and Cornell contend that this forward-looking thinking is not only environmentally sound but also economically prudent. By neglecting climate adaptation, businesses stand to lose out on billions in trade and productivity.

In spite of the obvious financial and moral imperatives, the fashion industry remains behind in planning for climate resilience. Most firms either downplay the risk or look at short-term measures like relocating production to other areas. But the model built by Schroders and Cornell seeks to transform these attitudes by offering tangible steps and engagement tools that align long-term business interests with sustainability objectives.

Schroders has already started to apply the framework in its investor engagement efforts, initially with major clothing brands. Schroders will continue to roll it out across more sectors over the coming months. In doing this, Schroders aims not just to shield investors' portfolios from climate-related volatility but also to build a more resilient and equitable global economy.

The release of this framework marks an important pivot in the crossroads of climate change, labor rights, and finance. With increasing climate risk, the cooperation between Schroders and Cornell makes clear that it is time for investors, governments, and firms to move past carbon mitigation thinking and begin incorporating climate adaptation into business as usual.