Calculating the financial risk of climate change.

All businesses, organisations, charities etc will need to know the financial risk of climate change in order to secure their financial future. The climate crisis presents unprecedented financial risk on the global economy. So it goes without saying that climate change finance should be an important part of all businesses across the UK.

In the UK, the government outlined their plans to be more aware of the carbon intensity of the financial system. They followed this up by planning out targets and legislation to help reduce the impact businesses have on the climate crisis.

Part of what the government are considering is introducing mandatory reporting based on the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD).

 

Who are the TCFD and what do they recommend?

The Task Force on Climate-related Financial Disclosures was founded in 2015 by the Financial Stability Board in order to improve the ability for businesses to report on the financial risk of climate change on organisations large and small.

The TCFD address the challenge that climate change can have on all aspects of business. The climate crisis will result in businesses losses, threaten assets and infrastructure along with increased natural disasters, destruction of the natural world and cause countless human casualties.

As governments and businesses across the world begin their Net Zero transitions, the TCFD provide recommendations for businesses in regard to climate-related disclosures that are much more informed about the impact of the climate crisis.

They are recognised as a valuable tool to help manage the related financial risk of climate change and a guiding influence when deciding future green or low carbon investments.

 

What is so important about reporting?

Uncertainty surrounding the relationship between finance and climate change and the businesses world is what drives the need for reporting. Outlining the financial risk of climate change will also create a more transparent and open environment to help other organisations discuss their businesses related carbon impact. This will hopefully, in turn, lead to a lot more businesses setting Net Zero targets and making efforts to reduce their carbon intensity.

Reporting can also get you a step ahead of the government, before they introduce any more legislation, you could protect your business from any future charges or mandatory legislation changes.

For example, the government are considering introducing mandatory reporting for all companies in the UK that have more than 500 employees and an annual turnover of £500m, also including large asset companies currently required to produce a non-financial information station. These changes would be introduced into UK law by the government by 6 April 2022.

So, the government have already set in motion their plans to enforce disclosure of climate-related finances. Which is excellent, it will help increase the likelihood that organisations across the UK will start seeing the benefit of measuring their relationship with climate and finance. Ultimately, we might see more businesses setting goals and reducing their carbon emissions.

 

What could the future of climate change and finance reporting look like?

It’s clear that legislation relating to climate change and finance will stick around, and more than likely, as we get closer and closer to 2050 the legislation will change. The current plans for mandatory reporting are just the beginning, the industry has predicted that the following actions will be made in the future.

 

All businesses will report on their climate crisis contribution.

Under current legislation only larger businesses and companies involved in large supply chains are expected to report. It makes sense, they have the most resources and probably the expertise to begin their transition to net zero.

It will certainly be expected that all businesses and organisations in the UK will have to start reporting on their impact on climate change. The government will, no doubt, introduce these measures in a measured and organised manner.

If you currently don’t fit within the criteria but need help in reporting your carbon emissions and plan on setting Net Zero targets that’s where we can help!

 

Government support for climate change and finance

There’s no doubt that the government will continue to expand upon current legislation in order to support organisations in the UK with their Net Zero transitions. There is doubt that the government will provide adequate support, or at least there won’t be a personal approach.

Along the line we will see further incentive from the government to uptake green technology and net zero dedications, backed by the recommendations from the TCFD.

 

 

To cut a long story short, the main financial risk of climate change comes from new government legislation that will effect businesses without the skills and knowledge to create the reports to meet the government mandates. That’s why we have launched our new Net Zero page to provide organisations across the UK with our expert knowledge to guide them along on their Net zero transition.

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