As experts warn about rising temperatures, investors seek to understand how climate change could affect the companies in their portfolios. In response, the Task Force on Climate-Related Financial Disclosures (TCFD) established a framework for companies to disclose their climate-related risks and opportunities. What we discover from this process will teach us how to create better, more climate-resilient business models.

“The risk climate change poses to businesses and financial markets is real and already present. It is more important than ever that businesses lead in understanding and responding to these risks—and seizing the opportunities—to build a stronger, more resilient, and sustainable global economy.”

Michael R. Bloomberg, Chairman of TCFD

What are the risks?

Climate-related risks can be split into two categories: risks associated with the transition to a lower-carbon economy (Transition Risks) and risks associated with the physical impacts of climate change (Physical Risks).

Transition Risks

Transitioning to a low-carbon economy will require significant changes to policy, law, technology, and markets. Companies that are slow to adapt to these changes run the risk of financial and reputational damage.

Physical Risks

Physical risks may have financial implications for organisations, such as direct damage to assets and indirect impacts from supply chain disruption. Organisations’ financial performance may also be affected by changes in water availability, sourcing, and quality, food security, and extreme temperature changes affecting organisations’ premises, operations, supply chain, transport needs, and employee safety.

What are the opportunities?

Climate change mitigation and adaptation efforts can provide opportunities for businesses, such as resource efficiency and cost savings, the adoption of low-emission energy sources, the development of new products and services, access to new markets, and supply chain resilience.

The shift towards a low-carbon economy is underway.

Our job is to help you understand the climate-related risks and opportunities you face, and how they can drive your business forward. For more information, take a look at our Climate Transition service or contact us.