Firms already account for financial, operational and reputational risks they face. Soon they will have to make sense of how climate change will impact upon their businesses. How ready is your company?
One does not need to be a climate scientist to understand the supply chain disruptions associated with the physical impacts of climate change (e.g. inland flooding, extreme heat, and sea level rise) pose potentially severe threats to financial markets. Such fears have provoked investors, shareholders, lenders and underwriters to demand a more transparent reporting system for climate-related financial data. As I write, Commonwealth Bank of Australia is being sued by its shareholders over an alleged failure to properly disclose the risks its business faces from climate change.
In June 2017, the Task Force on Climate-Related Financial Disclosures (TCFD) – a global task force created by the G20 – developed a framework for companies to voluntarily disclose the financial impact of their climate risks. It has now been backed by more than 100 companies, holding $11 trillion of assets.