Financial Disclosure on Climate Risk

By Chrysann D’souza and Purnima Singh (PGDRM Batch Jan’21)

Climate risk and its relation with corporations

Global Climate Reporting Boards

The Sustainability Accounting Standards Board (SASB) is a non-profit organization, founded in 2011 by Jean Rogers to develop sustainability accounting standards.
The Climate Disclosure Standards Board (CDSB) is an international consortium of business and environmental NGOs that is committed to advancing and aligning the global mainstream corporate reporting model to equate natural capital with financial capital. We do this by offering companies a framework for reporting environmental information with the same rigor as financial information.
The Global Reporting Initiative (GRI) is an international independent standards organization that helps businesses, governments, and other organizations understand and communicate their impacts on issues such as climate change, human rights, and corruption.
International Integrated Reporting Council (IIRC) offers guidelines for the development of an integrated reporting model that includes information about the organization’s capitals (its resources and relationships) and explains how the interaction and impact with the environment and capitals is, with the aim of creating value in the short, medium and long term.
The International Financial Reporting Standards Foundation, or IFRS Foundation, is a nonprofit accounting organization. Its main objectives include the development and promotion of the International Financial Reporting Standards (IFRS Standards) through the International Accounting Standards Board (IASB), which it oversees.
The Financial Stability Board created the Task Force on Climate-related Financial Disclosures (TCFD) in 2015 to develop a set of voluntary disclosure recommendations for use by companies in providing decision-useful information to investors, lenders, and insurance underwriters about the climate-related financial risks that companies face.

Task Force on Climate-Related Disclosures – Recommendations

Scope:

Financial companies like Banks & insurance companies;
Non- financial companies such as energy, building, and materials;
Agriculture;
Food and forest companies;
Useful to companies of all sizes and located in various countries around the world.

Focus on climate-related risks:

TCFD recommendations related to governance, strategy, risk management, and metrics and targets ask companies to disclose specific information on climate-related risks and opportunities.

Its primary focus is on climate-related risks, but it also focuses on climate-related opportunities through risk identification, risk assessment, and prioritization and risk response.

Governance:

Disclose the company’s governance around climate-related risks and opportunities.

Strategy:

Disclose the actual and potential impacts of climate-related risks and opportunities on the company’s businesses, strategy, and financial planning where such information is material.

Risk Management:

Disclose how the company identifies, assesses, and manages climate-related risks.

Metrics and targets:

Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.

Features of effective disclosure:

- Presented in sufficient detail
- Should take into account and address different time frames and types of impacts
- Thorough overview of company’s exposure to potential climate-related impacts and its size
- Should be written with the objective of communicating financial information
- Changes in the approach and methods should be explained

Common risk management process

Read the full research study here: Financial disclosure on climate risk

Disclaimer
This report has been produced by students of Global Risk Management Institute for their own research, classroom discussions and general information purposes only. While care has been taken in gathering the data and preparing the report, the student’s or GRMI does not make any representations or warranties as to its accuracy or completeness and expressly excludes to the maximum extent permitted by law all those that might otherwise be implied. References to the information collected have been given where necessary.
GRMI or its students accepts no responsibility or liability for any loss or damage of any nature occasioned to any person as a result of acting or refraining from acting as a result of, or in reliance on, any statement, fact, figure or expression of opinion or belief contained in this report. This report does not constitute advice of any kind.