Dec 15, 2016 - 10:47am
The draft recommendations
of the G20’s Financial Stability Board’s Taskforce on Climate-Related Financial Disclosure (TCFD), released last night, have confirmed that both the impacts of climate change and the implementation of the Paris Agreement’s commitment to limit warming to 1.5-2°C, present immense implications for all companies, asset owners and managers, The Climate Institute said.
“It is hugely significant that this industry-led task force, at the behest of the G20’s financial stability body, is highlighting the very real risks that climate change presents to companies, investors, and ultimately to economies and financial systems worldwide,” said Climate Institute CEO John Connor. “The TCFD calls climate change, ’One of the most significant, and perhaps most misunderstood, risks that organizations face today.’”
The Paris Agreement swiftly came into effect this year, including with bipartisan backed ratification from Australia. These commitments mean a net zero emissions world in the middle of this century and an escalating focus on building resilience to growing impacts. For companies, investors and other financial actors, there is no going back: they need to carefully consider how they will be affected.
“By providing authoritative guidelines for comparable climate-related disclosure, we expect the Financial Stability Board’s task force will lead to much more comprehensive and widespread disclosures.” John Connor said.
“Importantly the task force acknowledges that these recommendations are the foundation, the floorboards, of appropriate disclosure. They provide an excellent starting point from which business, community and governments can engage with this issue from a risk management rather than an ideological perspective.”
The FSB task force recommends that companies and financial institutions should conduct comprehensive scenario analysis, specifically including the implications of actions that limit warming to 2°C. It recommends the identification of their risks and opportunities from this transition, as well as their exposure to the physical impacts of climate change.
“It is important to note that the TCFD recognises that many large companies and asset owners are already assessing their exposure to climate-related risks.” Mr Connor said.
The industry-led task force was announced last December by Mark Carney, Bank of England governor and FSB chair, and is led by Michael Bloomberg, founder of Bloomberg LP. It will now enter a period of consultation before releasing its final recommendations, which will ultimately be submitted to the G20 at its June 2017 meeting.
The Financial Stability Board itself was formed in 2009 to promote international financial stability, after the financial crisis had damaged many economies. It is made up of G20 financial authorities; Australia’s FSB members are Treasury and the Reserve Bank of Australia.
The Climate Institute has pioneered a focus on investor disclosure and systemic financial risk from 2008, when it launched the Asset Owners Disclosure Project, and with recent research on implications for Australia’s financial system and property investments. It welcomes the draft recommendations.
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