FourTwentySeven Climate Solutions: How to disclose climate risk and opportunities?

Four Twenty Seven Climate Solutions
TCFD Releases Final Recommendations
The Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) released their final recommendations in late July. The changes to the recommendations reflect the extensive feedback the Tasforce received from the stakeholder engagement process in the past six months. Key changes include:
  • Simplifying the recommended disclosure related to Strategy and scenarios to focus on the resiliency of an organization’s strategy to climate risk and opportunities
  • Establishing a threshold for organizations that should consider conducting more robust scenario analysis to assess the resilience of their strategies.
  • Clarifying that the recommended disclosures related to the strategy and metrics and targets recommendations depend on an assessment of materiality, whereas disclosures on governance and risk management are relevant for all organizations.
  • Updated conceptual map of climate-related risks and opportunities and associated financial impacts.

The recommendations were presented at the G20 summit in Hamburg, Germany last week, with hopes that the world leaders would formally endorse the guidelines. Climate change was high on the agenda for the summit, where all but the United States voiced a
strong re-commitment to the goals of the Paris Agreement, and the G20 included by reference the TCFD recommendations in the Climate and Energy Action Plan for Growth
CEOs Endorse TCFD recommendations
The TCFD final recommendations were endorsed by over 100 CEO’s from a wide range of companies, including large financial institutions like Barclays and Morgan Stanley as well as energy and manufacturing companies like Suez, DuPont, and Unilever. Reactions from a broad range of financial analysts was also positive, noting the need for improvements and wider adoption of climate risk disclosure practices.

A number of initiatives are already under way to think through and plan the implementation of the TCFD recommendations, such as the UNEP FI’s effort with
major banks from around the world who have pledged to work towards adopting these recommendations, and put forth actions they see as needed for broader adoption of climate risk reporting.

Further readings:
  • The Economist Intelligence Unit’s  “The Road to Action” report finds that investors, asset managers, and banks are in urgent need of a way to identify and measure how the industry is responding to climate-related risks. It notes that their interviewees widely regard these recommendations as having the clearest mandate to providing possible solutions.
  • Aon’s white paper Financial Regulators Awaken: Prepare to Disclose Climate Risk notes that risk management and analytics is what differentiates the TCFD’s recommendations from many existing standards. “Risk management, including insurance and risk analytics, is given a key role in helping businesses understand and quantify climate risks. The recommendations provide a framework that can enhance risk management, empower corporate strategy, and improve resilience in a fast-changing world.”
  • The 2-Degree Investing Initiative takes a deep dive into corporate disclosures in its forthcoming report “Limited Visibility”, part of their Tragedy of the Horizon program. The report presents the current state of corporate disclosure on long-term risks and long-term forward looking data using analysis of MSCI World companies’ financial disclosures.
Climate Change in the Boardroom: Towards Climate-Competent Boards
What is a climate-competent board, and why does having one matter? Four Twenty Seven CEO Emilie Mazzacurati was invited to speak on exactly that during the Investing in the Age of Climate Change symposium at the University of Oregon. The symposium tackled issues around climate risk, their connection to investment decisions, and the need to understand how these risks can affect an organization’s business in the long-term. Emilie delved into the climate-competent board and presented on the opportunities they provide, and steps to implement climate-competency on a board. Watch the presentation, delivered via webcam.
How Much Will Climate Change Cost in the United States?
A new research article in Science magazine reveals that in the decades ahead, climate change will affect parts of the United States differently. The study found that areas in the Midwest and Southeast will likely suffer more economic harm from climate change with some areas possibly benefiting from the wild winters. The researchers hope to continue working on this study to further provide more specifics in individual areas to help local policymakers prepare for the incoming risks.
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