Resource Database

Before using scenarios, it is essential to know how to correctly interpret them. This implies first navigating the complex ecosystem of climate-related scenarios and identifying those that can be used to explore issues linked to the low-carbon transition: transition scenarios. It also requires fully understanding the issues relating to these scenarios.

The goals of this publication are therefore:
– Explaining the key concepts underpinning climate-related scenarios, presenting the main families of scenarios and the questions these scenarios help to answer;
– Providing keys to reading transition scenarios in order to facilitate their interpretation and to avoid misunderstanding.

A framework for reading transition scenarios was developed to provide readers with a step-by-step guide to scenarios. It summarises the eight main steps to follow in order to interpret a transition scenario according to the explanations developed in this study, and is applied to 5 publicly-available scenarios.

This study examines which specific challenges can arise for German companies when implementing the TCFD recommendations. Following a presentation of the theoretical and practical background, it presents the results of an analysis into German chemical companies’ annual and sustainability reports, including their CDP response, and highlights key findings from a company interview. The study shows how current reporting practice, which often closely aligns with minimum legal requirements, will have to be extended and which adjustments of internal corporate processes and structures need to take place to enable TCFD-aligned disclosures. Potential solutions to the challenges are discussed against the backdrop of sustainability management.
This resource is in German.

In this case study, part of the Sustainability Accounting Standards Board (SASB) Integration Insights series, PineBridge Investments explains how it uses SASB’s framework to help build TCFD-ready, climate-resilient portfolios. Leveraging SASB’s focus on financial materiality, PineBridge defines sector-specific, climate-stress scenarios that allow it to readily incorporate key climate exposures alongside traditional risk-adjusted portfolio metrics, enhancing its analysis and facilitating more effective mitigation of the risks associated with a transition to a low-carbon economy.

Wellington Management and CalPERS launch innovative framework to help executive teams better evaluate physical risks of climate change — new P-ROCC (physical risks of climate change) framework aims to facilitate more informed investment decisions through enhanced corporate disclosures

The Climate Risk Sensitivity Assessment Tool was developed to help Brazilian banks identify the sensitivity of their credit portfolio to climate risks. The tool uses as reference concepts of Resolution nº 4327 (relevance and proportionality) and TCFD (critical sectors), with the degree of exposure to climate risk of bank operations (relevance) and the complexity of banks addressing exposure to climate risk (proportionality). Portfolio valuation through the tool can take place at three levels: consolidated portfolio, sectoral portfolio and clients, identifying exposure to critical sectors and the result of this analysis can be used for monitoring and prioritization of actions. This report was developed in partnership with SITAWI Finance for Good and with the support of a group of FEBRABAN member banks.

Following the release of the TCFD second status report this June, we analyzed TCFD supporters’ disclosure around climate change using natural language processing, finding that financial services are talking about climate change more than ever before.

In particular:
1) The number of finserv TCFD supporters mentioning climate change with a high emphasis has more than doubled from 14% in 2016, the year before the TCFD recommendations were published, to 33% in 2019.

2) Climate change is predominantly discussed through a risk rather than an opportunity lense – with 54% of finserv TCFD supporters referring to the topic in relation to risk and 20% in relation to opportunity in 2018.

3) Interestingly, climate change has been predominantly mentioned in the context of distant future risks, rather than in recognizing the upcoming implications to business.

4) High emphasis reporting among the largest financial services companies that don’t support the TCFD (market capitalization above $20bn) has risen from 12% in 2017 to 19% in 2019, the period since the introduction of the TCFD recommendations.

5) The number of climate-related regulations and voluntary initiatives has almost doubled since 2014 (211 between 2009 and 2013, and 418 between 2014 and 2018).

This Toronto Centre Note discusses issues raised for banking supervisors by climate change. Two key issues are: i) physical, transitional and other risks arising from climate change are likely to have an adverse impact on the credit, market, operational, legal, reputational and strategic risks faced by banks; and ii) the banking sector is likely to play a key role in the financing of activities that will have an impact on climate change.

The TCFD’s second status report provides an overview of disclosure practices aligned with the Task Force’s recommendations between 2016 and 2018. The report also examines the decision-usefulness of existing climate-related financial disclosures to users of disclosure, and evaluates disclosures of strategy resilience and the challenges faced by preparers using scenario analysis. At the time of publication, nearly 800 organizations have expressed their support for the TCFD recommendations, a more than 50% increase from the publication of the first status report in September 2018.

In 2018, some 6,707 of the 6,937 companies responding to CDP disclosed information on whether they were exposed to climate-related risks and opportunities. This analysis examines those responses, focusing in on two core samples - the full range of disclosing companies, and a smaller sample made up of the world's 500 biggest companies by market cap.

Potential financial risks arising from climate change are an increasing area of focus, particularly for investors and regulators. To provide a benchmark for how mature firms are in their approach to climate risk management, in the first quarter of 2019, the GARP Risk Institute undertook a global, cross-sectoral survey.

The survey was structured around the main themes for climate risk reporting that have been developed through the TCFD.

When lenders and investors take financial decisions, it is their responsibility to price risks correctly. Yet environmental, social and governance risks (ESG), including some of the greatest risks we face globally, are not being priced in. The A4S Essential Guide to Debt Finance has been created through extensive interviews with lenders and debt investors to understand how ESG is currently considered in debt finance decisions, and how the market is expected to shift in the future.

The Guide has been created by treasury teams for treasury teams, but will also be of interest to debt investors and lenders, and other stakeholders seeking to promote a sustainable future.

With over 600 organisations publicly expressing their support for the Task Force on Climate-related Financial Disclosures (TCFD), it’s clear companies and investors are ready to take action on the risks and opportunities presented by climate change. In response to market demand for good practice examples and guidance, the Climate Disclosure Standards Board (CDSB) and the Sustainability Accounting Standards Board (SASB) have come together to publish a clear, practical, “how-to” guide for companies seeking to implement the TCFD recommendations. Kindly hosted by the London Stock Exchange, CDSB invite you to join us on the 14th May for an afternoon forum of in-depth discussion and networking to celebrate the launch.