The Investment Association (IA), which represents 250 members with £8.5tn in assets, is calling on the Financial Conduct Authority to make TCFD reporting mandatory for all 480 premium-listed FTSE companies. While the number of FTSE 100 companies claiming they have implemented the Task Force on Climate-related Financial Disclosures (TCFD) framework has more than doubled in the past year, to 77, the IA said just 53% had published reports covering all four of the key categories – climate governance, strategy, risk management, and metrics and targets.
The Australian Council of Superannuation Investors (ACSI) has published the finding in its annual benchmark analysis of disclosures by ASX 200 companies, which has looked at entities’ corporate reporting up to 31 March.
The analysis has indicated that the Task Force on Climate-related Financial Disclosures (TCFD) framework, first rolled out in 2017, has now become the most common benchmark for companies’ reporting in high-risk sectors.
Riskthinking.AI’s forward-looking scenarios align with the TCFD framework and help decision-makers disclose their climate-related financial risks.
“Climate-related risks and opportunities are undeniably intertwined with those associated with water. Any assessments of future water-related events should therefore consider the climate, but this is only one piece of the puzzle. Other socio-economic drivers impact the supply and demand of water, such as regulatory, market and demographic changes. The new WWF Water Risk Filter tool supports the integration of water into TCFD-aligned scenario analysis and will strengthen the disclosure and assessment of companies’ resilience to future scenarios,” said Francesca Recanati, Environmental Specialist (Technical Manager), Climate Disclosure Standards Board (CDSB).
Reinsurers are well-placed to advise clients on responding to climate change risk. As climate change and the associated increase in natural catastrophe events alters the contemporary risk landscape, there is now an opportunity for companies to partner with the (re)insurance market and put its expertise to work.
Climate change is complicating two of the most important board responsibilities — its duties to protect long-term shareholder value and oversee risk management, according to Rob Bailey, Director of Climate Resilience at Marsh & McLennan Advantage and Jack Flug, Managing Director, FINPRO at Guy Carpenter-affiliate Marsh U.S. Investors and regulators are paying more attention to how companies are managing climate risks as concerns grow about the risk that climate change poses to shareholder value, with implications for directors.
Increasingly, corporations are expected to report on the physical risks (e.g. wildfires, flooding, extreme storms), and transition risks (e.g. disruptions to their supply chains and potential for stranded assets) they face on account of climate change. We argue that such reporting is not only part of their fiduciary duty, but is part of smart decision-making that will help them to mitigate and hedge against such risks.
Lenders should be subjected to tough reviews of their readiness for economic threats posed by severe weather, required to disclose risks lurking in their portfolios and perhaps forced to set aside extra capital, a government study recently recommended.
Smoke from the West Coast traveled across the US this week and is now well on its way to Europe. From our HQ in NYC – the sky was hazy and the sun resembled the Eye of Sauron.
Climate change risk has plagued US insurers over the last several years and the severity is growing. A task force led by several US financial regulators issued a 200-page report warning that climate change poses “serious emerging risks to the U.S. financial system.” Many central banks in other countries are conducting climate “stress tests,” and, in Europe, many companies are now reporting their climate risks.
Riskthinking.AI helps clients better understand their climate-related financial risk so they know where their portfolios are exposed and can hedge or take other appropriate actions.
New Zealand will be the first country in the world to require the financial sector to report on climate risks, the Minister for Climate Change James Shaw announced today. “Today is another step on the journey this Government is taking towards a low carbon future for Aotearoa New Zealand and a cleaner, safer planet for future generations. Riskthinking.AI’s forward-looking scenarios help companies understand their climate-related financial risk – a crucial first step in the reporting process.
More than half (58 percent) of companies on the S&P/TSX Composite Index have published a sustainability report this year – a rise of 10 percentage points on last year, according to the latest ESG disclosure study from Millani. Aligning sustainability reports with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)- as a growing number are doing (presently 30 percent of companies in the S&P/TSX Composite)- requires companies to report on the climate related risks they face. Riskthinking.AI’s scenarios and analytics software helps companies understand these risks and hedge as needed.
Climate change poses a major risk to the stability of the U.S. financial system and to its ability to sustain the American economy. Climate change is already impacting or is anticipated to impact nearly every facet of the economy, including infrastructure, agriculture, residential and commercial property, as well as human health and labor productivity. Over time, if significant action is not taken to check rising global average temperatures, climate change impacts could impair the productive capacity of the economy and undermine its ability to generate employment, income, and opportunity. Even under optimistic emissions- reduction scenarios, the United States, along with countries around the world, will have to continue to cope with some measure of climate change-related impacts.
This reality poses complex risks for the U.S. financial system. Risks include disorderly price adjustments in various asset classes, with possible spillovers into different parts of the financial system, as well as potential disruption of the proper functioning of financial markets. In addition, the process of combating climate change itself—which demands a large-scale transition to a net-zero emissions economy—will pose risks to the financial system if markets and market participants prove unable to adapt to rapid changes in policy, technology, and consumer preferences. Financial system stress, in turn, may further exacerbate disruptions in economic activity, for example, by limiting the availability of credit or reducing access to certain financial products, such as hedging instruments and insurance.
A major concern for regulators is what we don’t know. While understanding about particular kinds of climate risk is advancing quickly, understanding about how different types of climate risk could interact remains in an incipient stage. Physical and transition risks may well unfold in parallel, compounding the challenge. Climate risks may also exacerbate financial system vulnerabilities that have little to do with climate change, such as historically high levels of corporate leverage. This is particularly concerning in the short- and medium-term, as the COVID 19 pandemic is likely to leave behind stressed balance sheets, strained government budgets, and depleted household wealth, which, taken together, undermine the resilience of the financial system to future shocks.