Resource Database

Resources for the Future (RFF) sta! utilized a suite of models to estimate the projected energy-related carbon dioxide emissions reductions under di!erent climate policy proposals, including alternative carbon fee scenarios.

The Commonwealth Climate and Law Initiative (CCLI) has commissioned a legal opinion on directors’ duties and disclosure obligations regarding climate change.

This report offers detailed recommendations to guide the banking industry in fully measuring, analyzing, and acting against threats posed by the physical risks of climate change. It sets out a practical roadmap to help banks conduct risk assessments and incorporate climate risks into their day-to-day decision-making.

The Financial Reporting Council (FRC) has published the findings of its review of reporting on emissions, energy consumption and related matters under the new Streamlined Energy and Carbon Reporting (SECR) rules which came into effect from 1 April 2019.

The FRC’s review considered how a sample of companies and Limited Liability Partnerships (LLPs) had complied with the new SECR requirements, identified examples of emerging good practice and outlined its expectations for future reporting. While the sample of reports largely complied with the minimum statutory disclosure requirements for emissions and energy consumption, more needs to be done to make these disclosures understandable and relevant for users. In particular, entities need to explain more clearly how information is calculated, which operations and emissions are included in their reported numbers and the level of third-party assurance obtained over the information. They also need to consider how to integrate these disclosures with other narrative reporting on climate change, especially any emission-reduction targets.

Legal opinion on the obligations of company directors regard to the issues associated with climate change under Indian law, considering physical, transition, and litigation exposure risks.

Climate services are intended to improve climate-sensitive decisions by making climate information ‘useful, useable and used’. Here, we analyse 27 expert interviews to evaluate whether this user-driven model of climate science has been successfully implemented in the public sector. We show that, although climate services promise better decision-making, they mainly focus on delivering better data. The norms and institutions of climate science produce three key tensions in operationalizing climate services: a focus on products rather than processes, services based on broad assumptions about demand rather than being demand-driven, and the narrow economic valuation of products rather than evaluation of improvements in decision-making. These tensions help explain why climate services often generate nominal changes in climate science where transformations are promised. Transformational change requires that climate services account for diverse social structures, behaviours and contexts. Integrating social science is no panacea for demand-driven climate services, but it is certainly a prerequisite.

Since 2018, the Brazilian Federation of Banks (FEBRABAN) has been leading a project for the implementation of TCFD recommendations in Brazil. In the past three years, FEBRABAN and its Working Group on Climate and Green Economy developed tools, publications and workshops to strengthen the capacity of local banks on the TCFD agenda. At the individual level, banks have been improving their governance, strategy, risk management and transparency practices. This report presents a brief overview of the progress over the past years and the current status of FEBRABAN’s TCFD roadmap, developed with the support of SITAWI.

Emerging awareness of climate-related financial risk has prompted efforts to integrate knowledge of climate change risks into financial decision-making and disclosures. Assessment of future climate risk requires knowledge of how the climate will change on time and spatial scales that vary between business entities. The rules by which climate science can be used appropriately to inform assessments of how climate change will impact financial risk have not yet been developed. In this Perspective, we summarize the demands by the business and finance community for reliable climate information, and the potential and limitations of such information in the context of what climate models can and cannot currently provide.

Climate risks are now fully recognized as financial risks by asset managers, investors, central banks, and financial supervisors. As a result, the integration of climate risk metrics into risk management processes is moving up agendas worldwide. In that context, a rapidly growing number of market participants and financial authorities are exploring which metrics to use to capture climate risks, and to what extent the use of different metrics delivers heterogeneous results. This discussion note takes a first step in analyzing the convergence in assessments of climate-related transition risks across metrics providers, based on the ECB corporate bond portfolio. Our findings show that firms’ risk assessments across metrics are fairly heterogeneous but tend to converge on which firms are most and least exposed to transition risks. We also show that the temperature targets and time horizons underlying the metrics matter, although moderately, for the assessment of firms’ risk exposure and that providers using similar methodologies tend to deliver more convergent assessments. Our findings contribute to the growing recognition that asset managers, investors, central banks and financial supervisors can and should use available metrics to better integrate climate risks into risk management and financial supervision.

Environmental, social, and governance (“ESG”) issues, long considered niche, are now core material concerns of investors and boards of directors alike, according to a survey conducted by the Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia Law School and LeaderXXchangeⓇ.

A team of academics from the Millstein Center and experts at LeaderXXchangeⓇ surveyed more than 130 investors and directors in Europe and North America to understand whether and how institutional investors and board directors incorporate climate-related issues in their investment decision making and their oversight responsibilities.

More than 60% of directors and 70% of investors surveyed indicated that climate risk is already impacting their business today. Other key findings, detailed below, reveal not only that both groups find ESG issues to be material, but that there are certain demographic and regional differences within each group’s views.

Selected Key Findings:

Investors and directors believe climate change issues are material:
– More than 60% of directors and 70% of investors indicated that climate risk is already impacting their businesses today.
– 75% of respondents believe they hold an ethical obligation to incorporate climate risk into their strategy.

Investors and directors view climate disclosure as a significant deciding factor:
– A majority of both groups indicated they view climate disclosure and financial reporting as equally important.

Investors in Europe appear more interested in climate-related issues:
– 88% of European investors think that climate risk reporting is at least equally as important as financial reporting; only 67% of North American investors agree.

Climate-related financial risks might have the potential to trigger the next systemic financial crisis, as recently stated by the Bank of International Settlements. In consequence, understanding these so-called Green Swan risks should be a key priority in financial decision making and supervision. However, a systematic approach and a comprehensive theory on climate-adjusted financial risk metrics is still missing. This study is a first step to fill this gap, with a focus on transition risks. Drawing on insights from climate science, economics and finance research, this paper derives a set of important criteria to ensure that climate risk tools provide high quality, comparable, and decision-relevant results. A sample of 16 climate transition risk tools are used to conduct two lines of research: First, by aid of descriptive analysis, the paper assesses the tools’ coverage of risk sources and financial assets, their inputs (i.e. underlying climate scenarios), and their outputs (i.e. climate-adjusted financial metrics). Second, the paper uses the previously defined criteria for an in-depth analysis of the quality, comparability and decision-relevance of the tools. The results will be presented at the individual tool level, and at the meta level. Based on the results of this descriptive and criteria-based analysis, the paper derives potential next steps for tool provider, conclusions for potential tool users, and guidelines for supervisory authorities. The analysis could be used as starting point for building a comprehensive theory of meaningful climate-related financial risk indicators, aid practitioners to select the tools best suited to their needs and use cases, and inform regulatory processes on financial climate risk assessment principles.

In risk analysis, it is recognized that hazards can often combine to worsen their joint impact, but impact data for a rail network show that hazards can also tend to be mutually exclusive at seasonal timescales. Ignoring this overestimates worst-case risk, so we therefore champion a broader view of risk from compound hazards.