Resource Database

As part of the EFRAG Project Task Force on Climate-related Reporting, this supplement to the report “How to improve climate-related reporting: A summary of good practices from Europe and beyond” provides insights on useful scenario analysis information by identifying good scenario analysis practices that could inspire companies in their implementation of the TCFD recommendations.

Organisations can benefit greatly from measuring and managing their performance on climate-related issues using quantitative metrics and targets.

As one of its four core elements, the Task Force on Climate-related Financial Disclosures (TCFD) recommendations encourages the disclosure of relevant metrics to help investors and other decision makers “better assess the organisation’s potential risk-adjusted returns, ability to meet financial obligations, general exposure to climate-related issues, and progress in managing or adapting to those issues”. Hosted by the Climate Disclosure Standards Board (CDSB), this episode will focus specifically on metrics and targets, featuring insights from Danone.

In this publication, KPMG discuss the reporting requirements most likely to be affected by climate issues, covering both the financial statements and the front-end (strategic, directors’, and governance reports). The list of potential disclosure considerations is long, and best approached once the specific issues that the company faces are properly understood and if necessary reflected in the balance sheet. A checklist approach is likely to result in unfocused, excessive disclosure.

Although some organisations have begun to apply traditional enterprise risk management (ERM) processes to the identification, assessment, and management of climate-related risks, the practice is not yet widespread or well developed. Lacking reliable information about how these risks are managed, investors are unable to properly evaluate the risk profile of an organisation or its securities. During this webinar, CDSB and HSBC offer insight into the key characteristics of effective risk management practices and what good practice disclosure looks like in line with the TCFD recommendations.

This letter from BlackRock CEO Larry Fink outlines the view that climate-related risks are an investment risk.

The ClimateWise Principles have provided a framework for the insurance industry to disclose climate-related risk and opportunity since 2007. All ClimateWise members report annually against this framework. Reports are independently reviewed, scored and anonymised in a combined report to form the ClimateWise Principles Independent Review.

In 2018, in response to the release of the TCFD Recommendations, the framework was fully aligned to the Recommendations whilst retaining the closely held values of the ClimateWise membership to inform policy and raise public awareness of climate change. The updated ClimateWise Principles reflect the ambition of members to be accountable on their climate response and support the wider insurance industry to follow suit.

The objective of the 2021 BES is to test the resilience of the current business models of the largest banks, insurers and the financial system to the physical and transition risks from climate change. The exercise will provide a comprehensive assessment of the UK financial system’s exposure to climate-related risks and therefore the scale of adjustment that will need to be undertaken in coming decades for the system to remain resilient. To this end, the BES will focus on sizing risks, rather than testing firms’ capital adequacy or setting capital requirements. It will also allow the Bank to examine how major financial firms expect to adjust their business models, and what the collective impact of these responses on the wider economy might be. Finally, the BES will provide a vehicle for financial firms to identify and address data gaps and to develop cutting-edge risk management approaches.

This discussion paper sets out the Bank’s proposed framework for conducting the 2021 BES. Given the unique nature of climate-related risks, the 2021 BES will be a novel exercise for the Bank and for participating firms.

The Science Based Targets initiative (SBTi) drives ambitious climate action by mobilising companies to set science-based targets (SBTs), GHG reduction targets that are aligned with what climate science tells us is required to meet the goals of the Paris Agreement. Since its launch in 2015, the SBTi has made significant progress against its goal of making science-based target setting standard business practice.

With investors increasingly aligning towards companies that understand their climate risks, it’s more important than ever for organisations to get a firm grip on the framework. Three quarters of investors surveyed for the TCFD Status Report 2019 indicated that they are now using the TCFD disclosures when investing.

So the key questions are: are the TCFD recommendations really that hard? Why are some companies hesitant to adopt? And what has worked for those that have already started on this journey of reporting their climate risks and opportunities?

Climate change is a systemic threat to the financial system and presents a material risk to the investment returns of long-term asset owners and their underlying superannuation members. Central banks and national financial regulators are increasingly warning of the financial risks of climate change. This policy brief outlines why investors have a clear legal obligation to manage climate risks. In addition, it outlines how financial regulators around the world are now requiring a proactive response from investors and companies to manage climate related financial risks in order to ensure financial stability.

According to a new report from BCS Consulting, more than a third of the world’s top 75 banks have still not declared their support for the Task Force on Climate-related Financial Disclosures (TCFD), an initiative to get companies to disclose clear comparable and consistent information about the risks and opportunities presented by climate change.

In this podcast episode, GARP Risk Institute Co-President Jo Paisley speaks with Hector Fontaine, Sustainable Finance Lead at BCS Consulting about the key findings of the report, what best practices are emerging around climate risk, and how this could conceivably impact future regulation.

For the GARP Risk Institute’s Global Survey on Climate Risk Management for Financial Firms, please see: https://www.garp.org/#!/garp-risk-institute/climate-risk-management-survey

MIT held a workshop, “Climate Scenarios in Corporate Disclosure,” on November 28 and 29, 2018, that gathered participants from oil and gas companies, global scenario producers, the financial community, and NGOs together with other experts to discuss climate‑related scenarios and their use in financial disclosures. The workshop was held under the Chatham House Rule. This white paper is meant to reflect and build upon the content of the discussions held at the workshop.