Category: Financial Services

Acclimatise contributes to Risk Magazine on the pressures facing energy firms, driven by physical climate change

Acclimatise contributes to Risk Magazine on the pressures facing energy firms, driven by physical climate change

By Anna Haworth

Acclimatise’s Anna Haworth recently contributed to an article for Risk Magazine focused on the increasing pressure energy firms are facing to assess physical climate risks. In the article, Anna shares a number of insights, developed through our long-standing experience of helping corporate clients, particularly in the oil, gas and extractives sector, position themselves to effectively manage physical climate risks.

In the article, Anna highlights that climate change doesn’t necessarily create new risks, but instead acts to change existing risk profiles – by altering their frequency, severity and spatial distribution. She reflects that the energy sector, and others with large, fixed assets and complex supply chains (e.g. mining and metals), are very experienced and well-equipped to identify and manage risks. Future climate-related risks have been on companies’ radars for a long-time, particularly from an operational, business continuity and supply chain management perspective. “What they are struggling with a bit more is bringing in the longer-term dimension and understanding how those risks might change over time, driven by changes in the climate and evolving stakeholder expectations” reflects Anna.

Anna describes the step-changes in the last few years in the positions of many key stakeholder groups around the imperative to understand and manage physical climate risks, with associated calls for disclosure. Arguably the most significant recent development is the publication of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) recommendations, in 2017. The TCFD set out a framework for the voluntary disclosure of climate-related risk and opportunities (governance, strategy, risk management, metrics and targets). The TCFD identifies physical risk as one of two categories of climate-related risk, alongside transition risk to a lower-carbon economy.

Anna reflects that corporates are encouragingly viewing the TCFD’s recommendations as being more than just disclosure: meeting the recommendations is also changing corporate behaviour and driving action. “The TCFD’s recommendations have really created an impetus for companies to progress their climate risk and opportunity assessment and management,” says Anna. “Oil and gas companies are increasingly aligning their climate change activities with these recommendations,” such as improving governance, strategic planning, risk management and reporting on targets, including progress in meeting these. We are also witnesses a flow-through of this information into companies Integrated Annual Reports or the development of stand-alone TCFD-style climate reports.

Anna, and others in the Acclimatise team, are at the forefront of developing methodologies and metrics that help corporates to identify, quantify, and disclose physical climate risks and opportunities. Anna has been instrumental in the development of our bespoke TCFD benchmarking and audit toolkit, which we have successfully deployed for several of our FTSE100 and major corporate clients. If you would like to discuss your needs, Anna Haworth would be delighted to hear from you.

The full Risk Magazine article published on 10 October 2019 is available here

Photo by Raghu Nayyar on Unsplash
What the EU Taxonomy means for adaptation and how it relates to the EU’s new International Platform on Sustainable Finance

What the EU Taxonomy means for adaptation and how it relates to the EU’s new International Platform on Sustainable Finance

By Robin Hamaker-Taylor

In the years since the Paris Agreement, the European Commission has sought to create the enabling conditions for the EU to meet its targets under the Paris Agreement and goals of the 2030 Agenda for Sustainable Development. The Commission developed their Action Plan for Financing Sustainable Growth in March 2018 and established a Technical Expert Group on sustainable finance (TEG) shortly after to assist in the development of proposals which advance the action plan.

Recognising that the investment industry often uses taxonomies to drive capital towards objectives, the TEG developed the EU Sustainable Finance Taxonomy (‘the EU Taxonomy’). The EU published its Technical Report on the Taxonomy in June 2019.

The EU Taxonomy helps translate the EU’s commitments to the Paris Agreement and the Sustainable Development Goals (SDGs) for investors. The Taxonomy bridges the gap between international goals and investment practice, clearly signalling the types of activities that are consistent with the low-carbon transition, adaptation and other environmental objectives.

What does the EU Taxonomy cover?

The EU Taxonomy provides a common language on what constitutes sustainable activities. It is a list of economic activities with performance criteria for their contribution to six environmental objectives, including:

1. climate change mitigation;

2. climate change adaptation;

3. sustainable use and protection of water and marine resources;

4. transition to a circular economy, waste prevention and recycling;

5. pollution prevention and control;

6. protection of healthy ecosystems.

To be included in the proposed EU Taxonomy, an economic activity must contribute substantially to at least one environmental objective and do no significant harm to the other five, as well as meet minimum social safeguards.

What does the EU Taxonomy mean for adaptation?

The EU Taxonomy holds that an economic activity makes a substantial contribution to adaptation objectives if: (i) all material physical climate risks identified for the economic activity are reduced to the extent possible and on a best effort basis; and/or (ii) it reduces material physical climate risk in other economic activities.  Economic activities can contribute to adaptation objectives in two different ways:

1. Adaptation of an economic activity: an economic activity is made more climate resilient by integrating measures to reduce all material physical climate risks to the extent possible and on a best effort basis; and

2. Adaptation by an economic activity: an economic activity contributes to adaptation of other economic activities to physical climate risks and must also be resilient to physical climate risks itself.

How is the EU Taxonomy useful for investors?

As set out in the TEG’s Taxonomy guidance document, a supplement to the technical report, the Taxonomy has various benefits for investors, including the following:

  • Provide clarity via a common language for investors, issuers, policymakers and regulators. Investors can use it to express their expectations for their investment decisions. Companies and project developers can use it to plan and raise finance, developing the pipeline of sustainable investment opportunities. All can use it to avoid unintended greenwashing.
  • Help translate commitments to the Paris Agreement and the SDG’s for investors. The Taxonomy bridges the gap between international goals and investment practice, clearly signalling the types of activities that are consistent with the low-carbon transition, adaptation and other environmental objectives.
  • Save time and money for investors and issuers. The criteria have been developed by environmental and industry experts and references the latest EU and international thinking. This allows investors to focus on what they do best, understanding the risk and return of an investment.
  • Support different investment styles and strategies. Investors marketing environmentallysustainable funds can invest in Taxonomy-eligible activities; engage companies on how they are progressing towards Taxonomy thresholds; or provide their own explanation for how they will achieve the fund’s goals. Investing in Taxonomy-eligible activities is not mandatory.
  • Put environmental data in context. Investors need to understand which companies are contributing to the low-carbon transition and which are building resilience to climate change, not just carbon footprints.
  • Avoid reputational risks. By screening out economic activities that undermine broader environmental, climate and social objectives, investors can avoid reputational risk and ensure that their strategy is robust.
  • Deepen the conversation. By focussing on economic activities, the Taxonomy provides a tool to understand company business models. Some business lines may be delivering on sustainability objectives, while others may not. This allows a sophisticated discussion around strategy and consistency with sustainability objectives.
  • Reward companies. A science and evidence-based framework to define what is environmentally sustainable provides companies with clear direction. It will help companies access finance for R&D while rewarding those undertaking environmentally sustainable activities.

What’s next after the EU Taxonomy?

Following the publication of its Technical Report on the Taxonomy, the TEG’s mandate has been extended to the end of 2019. The TEG is currently assessing feedback collected from July until September 2019. They are and refining incomplete aspects of the proposed technical screening criteria for substantial contributions and avoidance of significant harm. At the end of its mandate, the TEG will make further recommendations to the European Commission on the need to adjust and complement their work on an EU taxonomy. The TEG’s recommendations are designed to support the European Commission in the development of future regulation, as proposed in the taxonomy regulation.

In October 2019, the Commission published joint statement on the International Platform on Sustainable Finance (IPSF). The IPSF is part of the European Commission’s ongoing work to support a global transition to a low-carbon, more resource-efficient and sustainable economy. It was developed, in part, to realise greater international cooperation to join up efforts to scale up environmentally sustainable finance globally and promote the integration of markets for green financial products at international scale. To this end, the IPSF will act as a forum for facilitating exchanges and, where relevant, coordinating efforts on initiatives and approaches to environmentally sustainable finance, while respecting national and regional contexts. It remains to be seen how the EU Taxonomy will align or integrate with the platform, though this should be clarified in the coming months.

Cover photo by WMO on Climate Visuals
Central bank network NGFS continues momentum with new publications and additional members

Central bank network NGFS continues momentum with new publications and additional members

By Robin Hamaker-Taylor

The central bank Network for Greening the Financial System (NGFS) has recently enjoyed continued momentum with the development of several new reports and the addition of new members. 

In July this year, the NGFS published a technical supplement “Macroeconomics and Financial Stability: Implications of Climate Change” to the April 2019 NGFS Comprehensive report. The supplement provides an overview of existing approaches for quantitatively assessing climate-related risks and identifies key areas for further research. It also sets out a menu of options for central banks and supervisors to assess the risks.

This month (October 2019) the group also published “A Sustainable and Responsible Investment Guide for Central Banks’ Portfolio Management”. The guide, aimed at central banks that wish to adopt Sustainable and Responsible Investment (SRI) practices, builds on the results of a recent survey of NGFS members. It includes case studies of first-hand experiences by some NGFS members and identifies common SRI strategies. The most prominent SRI strategies are green bond investments and negative screening for equity and corporate bond holdings.

Adding four new members and an observer in September 2019, the network has now 46 members and 9 observers, representing five continents, over half of global greenhouse gas emissions and the supervision of two thirds of the global systemically-important banks and insurers.

Also, worth noting is the recent invitation of NGFS to a roundtable session of US Senate Democrats’ Special Committee on the Climate Crisis. At Capitol Hill in Washington, D.C., Frank Elderson, chair of the NGFS and executive director of De Nederlandsche Bank, gave an opening statement followed by the other NGFS delegates.

Going forward, the NGFS plans to publish additional technical documents to better equip central banks and supervisors with appropriate tools and methodologies to identify, quantify and mitigate climate risks in the financial system. This will include publishing further details on the NGFS transition scenarios and guidelines on scenario-based climate risk analysis.

Launched at the Paris One Planet Summit on 12 December 2017, the NGFS is a group of Central Banks and Supervisors. The network shares best practices amongst themselves and contributes to the development of environment and climate risk management in the financial sector and to mobilise mainstream finance to support the transition toward a sustainable economy.

Photo by Andrea Cau on Unsplash
UK FCA releases paper suggesting new TCFD aligned disclosure rules among others are on the horizon

UK FCA releases paper suggesting new TCFD aligned disclosure rules among others are on the horizon

By Robin Hamaker-Taylor

The UK’s Financial Conduct Authority (FCA) released a new paper (FS19/6) on 16 October 2019 relating to climate change. The paper, known officially as a Feedback Statement, sets out the next steps it intends to take relating to climate disclosures and integration of climate risk, among others. The paper summarises the responses received from stakeholders on the FCA’s October 2018 Discussion Paper (18/8) on Climate Change and Green Finance.

A total of 73 responses were submitted to Discussion Paper 18/8. In response, a number of priority near-term actions relating to three desired outcomes were identified. These desired outcomes will provide a foundation for the FCA’s future work on climate change and green finance. The following table provides more information on the FCA’s desired outcomes, associated priority actions and a selection of key next steps the FCA will take in the coming months and year.

In addition to actions relating to its three desired outcomes, the FCA will pursue collaborations with Government, other regulators and industry. The FCA has partnered with the Bank of England’s Prudential Regulation Authority (PRA), for example, to establish the Climate Financial Risk Forum (CFRF). The Forum was set up by the PRA and FCA as they recognised the need for capacity building within the finance industry and need to develop best practices in relation to climate risk analysis and disclosure. Working groups have been set up and a number of guidance documents around areas including disclosures, innovation, scenario analysis and risk management are under way. The FCA will continue to contribute to this and other initiatives. The FCA also suggests it intends to align its activities with the UK Government’s commitments as set out in the 2019 Green Finance Strategy (GFS) and will support the GFS as a member of the Government’s cross-regulator taskforce on disclosures.

The FCA has an overarching strategic objective to ensure that relevant markets function well. The release of this new paper suggests the FCA recognises the direct impact of climate change and the changes to financial services markets that climate legislation brings, and sees a role for itself to create an environment where market participants can manage climate risks.

Photo by Dayne Topkin on Unsplash
EU sets minimum requirements for climate benchmarks and recommends ESG disclosures in final report

EU sets minimum requirements for climate benchmarks and recommends ESG disclosures in final report

By Laura Canevari

On September 30th, the EU Technical Expert Group (TEG) issued its final report on climate benchmarks and environmental, social, and governance (ESG) disclosures. The report provides minimum requirements for two new climate benchmarks: the EU Climate Transition Benchmark (EU CTB) and the EU Paris-aligned Benchmark (EU PAB). The report also provides suggested recommendations on ESG disclosure requirements, applicable to all investment benchmarks (with the exception of currency and interest benchmarks).

These two measures (the two new benchmarks and requirement for ESG disclosures) were established as the result of a new EU regulation, passed in February 2019. The regulation, which amends EU Regulation 2016/2011, is part of the European Commission’s Action Plan for Financing Sustainable Growth.

New climate benchmarks

As noted in the TEG’s final report, a climate benchmark is an investment benchmark that incorporates specific objectives related to greenhouse gas (GHG) emission reductions and the transition to a low-carbon economy. These specific objectives are incorporated next to financial investment objectives and are based on the scientific evidence of the IPCC, through the selection and weighting of underlying benchmark constituents.

The main objectives of the new climate benchmarks are to:  

  1. Allow a significant level of comparability of climate benchmarks methodologies while leaving benchmarks’ administrators with an important level of flexibility in designing their methodologies;
  2. Provide investors with an appropriate tool that is aligned with their investment strategy;
  3. Increase transparency on investors’ impacts, specifically with regard to climate change and the energy transition; and
  4. Disincentivize greenwashing.

The EU CTB and EU PAB benchmarks build on existing low-carbon benchmarks, while also having broader climate action ambitions. Not solely limited to being used to fulfill a risk reduction objective, they can also fulfill objectives relating to opportunities, helping to increase the share of investments in climate-related opportunities.

As noted in the final report, investors can use climate benchmarks in the following ways:

  • To underly passive investment strategies;
  • As an investment performance benchmark for GHG emission-related strategies;
  • As an engagement tool; or
  • As a policy benchmark to help guide strategic asset allocation (SAA).

Investors may wish to use the final report to investigate the differences of these benchmarks and to understand the criteria that have to be met to qualify as an EU CTB or an EU PAB. The following table sets out which types of financial institutions would use the two types of benchmarks:

EU Climate Transition Benchmark (EU CTB) EU Paris-aligned Benchmark (EU PAB)
The  main  users  of  EU  CTBs  are  institutional  investors  such  as  pension  funds  and  (re)insurance companies with the objective of protecting a significant share of their assets against various investment risks related to climate change and the transition to a low-carbon economy, labelled as transition risks by the TCFD. The main users of EU PABs are institutional investors which aim to display more urgency than CTB investors and want to be at the forefront of the immediate transition towards a +1.5°C scenario.

Environmental Social and Governance (ESG) disclosure requirements

Alongside establishing the two climate benchmarks, the EU has also introduced requirements for ESG disclosures for any category of index, excluding interest rate and currency benchmarks. Index administrators are now required to provide information on both the methodology and benchmark statement. Regarding the methodology, the index administrator is required to deliver an explanation of how the key elements of the methodology reflect ESG factors for each benchmark or family of benchmarks. Regarding the benchmark statement, it is now required that the published benchmark statement contains an explanation of how ESG factors are reflected in each benchmark or family of benchmarks.

The new disclosure requirements apply to a wide range of indices available on the market and the final report sets out recommendations on minimum disclosure by asset class. For some asset classes, market practices have already been established and are expected to be applied (e.g. corporate and sovereign bonds and listed equities). However, many disclosure requirements apply to a wide variety of asset classes, including consolidated ratings for each element of ESG, a rating for ESG as a whole, and disclosure on alignment with the Paris Agreement.

Requirements relating to physical climate risk

The EU’s new climate benchmarks have been designed to inform the transition to a low carbon economy (e.g. broadly including products and services related to energy efficiency and renewable energy). They do not encompass the opportunities that stem from tackling physical climate risks. Physical risks are nonetheless included under the ‘E’ (Environmental) element. Physical climate risk exposure is expected to be reported for equities, fixed income and commodities asset classes.

Much work is still needed in order to set adequate disclosure requirements on physical climate risk exposures. The guidance on methodologies allowing investors to calculate physical climate risk exposure presented in the TEG’s final report also needs to be refined.

New regulations on the horizon and future developments

Apart from describing the minimum requirements for the new climate benchmarks and ESG disclosures, TEG’s final report serves as a basis to the drafting of further regulation by the Commission. The timeframe for proposed regulations is likely by the end of 2019. Regulations are expected to be adopted in early 2020 following a public consultation. A number of areas for improvement are also outlined by the TEG, which suggest what might comprise further guidance in the future. These areas include the further alignment between benchmark disclosures and emerging regulations on sustainability-related disclosures in the financial services sector. Furthermore, there could also be alignment of benchmarks and ESG disclosure requirements with the EU Taxonomy in the future.

Cover photo by World Meteorological Organisation / ClimateVisuals
First-ever TCFD summit calls for an acceleration of climate-related corporate disclosures

First-ever TCFD summit calls for an acceleration of climate-related corporate disclosures

By Anna Haworth

Last week saw the first-ever global TCFD Summit take place in Japan, with over 300 attendees gathering to review progress in the implementation of the TCFD recommendations and explore emerging best practice in climate-related financial disclosure.

Mark Carney – the Governor of the Bank of England and Chair of the Financial Stability Board (FSB) – gave one of the keynote speeches at the event and had some strong and urgent messages to share:

“To bring climate risks and resilience into the heart of financial decision-making, climate disclosure must become comprehensive, climate risk management must be transformed, and investing for a two-degree world must go mainstream.” 

In his speech, Carney took stock of the progress made to date since the final TCFD recommendations were published, and the path ahead for improving reporting and risk management. The main messages under each of these two themes are summarised below.

Progress so far

  • Echoing the 2019 TCFD status report, Carney highlighted the fact that the demand for TCFD disclosure is enormous (supporters control balance sheets totalling USD 120 trillion), and the supply of disclosure is responding, with four-fifths of the top 1100 G20 companies now disclosing in line with some or all of the TCFD recommendations. The level of sophistication of disclosures has also increased, with companies, financial firms and policymakers increasingly recognising that disclosures “must go beyond the static to the strategic.”
  • Progress had been made by many of the largest banks and energy companies to harmonise how they report their risks, however Carney noted that “progress in both quantity and quality is uneven across sectors.”
    • Banks have begun considering the most immediate physical risks to their business models –from the exposure of mortgage books to flood risk and the impact of extreme weather events on sovereign risk.
    • The PRA’s survey of UK banks last year found that almost three quarters are starting to treat the risks from climate change like other financial risks, rather than viewing them simply as a corporate social responsibility issue.

Path ahead

  • Markets need information to assess which companies are strategically resilient to physical and transition climate-related risks.
  • Over the next few years, companies, banks, insurers and investors must:
    • Increase the quantity and quality of disclosures by sharing best practice
    • Refine disclosure metrics to determine which ones are most decision-useful
    • Spread knowledge on how to assess strategic resilience to manage risks and realise opportunities
    • Consider how to disclose the extent to which portfolios are ready for the transition to net zero.
  • The next two reporting periods (i.e. 2 years) are seen as critical for corporations to reach a definitive view of what counts as a high quality disclosure before they become mandatory. Carney makes reference to multi-sector TCFD summits and more focused TCFD industry preparer forums as key opportunities for companies to continue to share knowledge on how, what and where they disclose.

As Carney notes “growing physical risks will prompt reassessments of the values of virtually every financial asset.” However, there are clear benefits for companies to take action to build climate resilience. Research by the Bank of England and PwC finds a positive correlation between companies’ stock price and the number of TCFD disclosures that firms make. This could be because investors reward companies that are leaders in managing climate-related risks or simply because TCFD adoption identifies companies that are more naturally disposed to longer-term strategic thinking and planning.

Furthermore, TCFD disclosure is increasingly a responsibility, as suggested by research from the Commonwealth Climate and Law Initiative that concludes that non-disclosure is a bigger liability risk than disclosure. Further research supports this claim as well. As Carney states “that is just one reason why jurisdictions like the UK and EU have signalled their intentions to make TCFD disclosure mandatory.”

Acclimatise is at the forefront of developing methodologies and metrics that help corporates and financial services organisations to identify, quantify, and disclose physical climate risks and opportunities. We offer a range of specialist tools developed specifically to support TCFD-related disclosures. From portfolio wide to deep-dive analyses of physical climate risks and opportunities, Acclimatise can provide your organisation with a comprehensive solution across all four core element of the TCFD recommendations, namely governance, strategy, risk management, and metrics and targets. We have been applying scientifically robust scenarios to our projects for over 15 years. We now apply this vast experience to our TCFD work, for the benefit of our major corporate and financial service customers. If you would like to discuss your needs, our disclosure experts Laura Canevari and Robin Hamaker-Taylor would be delighted to hear from you.

Mark Carney’s full speech from 8 October 2019 is available here

Cover photo by Louie Martinez on Unsplash.
New principles help identify potential range and type of investments that address physical climate risks

New principles help identify potential range and type of investments that address physical climate risks

By Robin Hamaker-Taylor

The Climate Bonds Initiative (CBI) have released new Climate Resilience Principles this week. The principles provide high-level guidance for investors, banks and governments to determine if projects and assets contribute to a climate-resilient economy. The Principles are intended for a wider audience that just bond issuers as the provide investors and stakeholders guidance on the potential range and type of climate resilience investments available. Apart from this, the Principles suggest: how to define and assess physical climate risks, and how to credibly demonstrate climate resilience outcomes.

Focusing on investments that address physical climate risks, the new Principles build on the 2015 Climate Bonds Standard & Certification Scheme for green bonds. Until now the scheme has focused on the extent to which a green bonds’ ‘use of proceeds’ needs to meet the sector-specific greenhouse gas Mitigation Criteria. The Climate Bonds Initiatives explains that climate bonds differ from green bonds only in that they finance climate change projects explicitly, and green bonds can finance environmental projects more broadly (including at times, climate-related projects).

The Principles were informed by the CBI’s Adaptation and Resilience Expert Group (AREG), of which Acclimatise CEO, John Firth, was a member. This is one of several thought leadership initiatives that Acclimatise has been actively involved with through out the last few years. Others include: 

  • EU Action Plan on Sustainable Finance – Member of the Expert Group for Adaptation Taxonomy (John Firth and Dr Richenda Connell);
  • Global Commission on Adaptation – Member of the Expert Review Panel for Technical Paper on Adaptation Finance published July, 2019 (John Firth and Dr Richenda Connell);
  • Coalition for Climate Resilient Investment (to be launched late September, 2019) (John Firth, Robin Hamaker-Taylor and Caroline Fouvet)

The Principles and the sector-specific Criteria (still under development) will support the mainstreaming of climate resilience considerations across all green bonds as well as improve transparency in the market for green bonds that aim to enhance resilience. It is also hoped that these Principles and the sector-specific Criteria can serve as a model for other identification and assessment schemes for climate resilient investments. 

Cover photo by Sergi Ferrete on Unsplash.
Are we heading towards mandatory climate disclosures?

Are we heading towards mandatory climate disclosures?

By Laura Canevari

This month, CDP and CDSB held jointly a webinar to discuss the development of disclosures and accounting in line with the TCFD Recommendations. The emerging regulatory approaches of countries, which promote climate-related financial disclosures, were also showcased.

Jeenie Gleed of CDP, reminded the audience that the TCFD recommendations can be the bedrock on which to support the implementation of Article 2.1 C of the Paris Agreement. As noted by the Overseas Development Institute (ODI) late last year, the TCFD recommendations are one among a number of information instruments paving the way towards the implementation of Article 2.1 C, which stipulates that Parties to the Agreement commit to ‘making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development’. Other information instruments include, for example, national initiatives such as China’s Green Finance Committee, Japan’s non-binding green bond guidelines, and the development of ISO 14097 for reporting on financing activities relation to climate change.

According to ODI, G20 countries have started to implement the TCFD recommendations through one or more of the following mechanisms: political and regulatory engagement; formal engagement with the private sector via the publication of guidelines and action plans; or encoding law. The table below offers a summary developed by the Cambridge Institute for Sustainable Leadership (CISL) on the level and type of implementation in G20 countries, where it can be noted that approximately two thirds of G20 members have engaged with the TCFD Recommendations, though this is primarily in the form of statements of support.

CDP and CDSB offered a closer look into the ways through which some of these countries and the EU are integrating the TCFD recommendations into the current legislative frameworks. They highlighted that a lot can be achieved through minor amendments of existing regulations and laws. Accounts of France and the UK were given, with well known examples regarding France’s Article 173 of the Energy Transition and Green Growth Law, for example.

Less well known examples were also given from Canada, where the government has released guidelines supporting the Canadian Business Corporation Act, such as:

  • NI 51-102 Continuous disclosure obligations;
  • NI 58-101 Disclosure of corporate governance practices; and
  • CSA Staff notice 51-333 Environmental reporting guidance, to incorporate TCFD recommendations.
  • More importantly, Canada has also released a notice on Reporting of climate change related risks (CSA Staff notice 51-358) and similar to the UK, they established an expert panel on sustainable finance, incorporating climate change considerations.

At the EU level, discussion focused on the non-financial reporting directive providing the basis of engagement with TCFD, along with EU Guidelines on reporting climate related information, and the EFRAG Project task force on climate related reporting. In particular, Art. 19 and 29 of NFR Directive (2014/95/EU) and article 20 of directive 2013/34/EU are specifically designed to align to the TCFD recommendations.

Summaries on how other jurisdictions are incorporating TCFD can be found by clicking here, and include the United States, Australia, New Zealand and Chile.

Overall the analysis showed that it is not a matter of if, but of when and who. Steps are being taken to incorporate the TCFD recommendations, with implementation gaining significant traction among central banks, regulators and supervisors. The analysis emphasised that change is occurring through small amendments and enforcement of existing regulatory frameworks.

The TCFD Recommendations are already spurring on much more than voluntary action. Regulators and supervisors are in the process of understanding what the market can take in terms of the release of mandatory disclosure measures. They have started evaluating, through voluntary measures and guidelines, what financial services and corporate actors can commit to in their disclosures. More can be expected to happen as other countries join this global effort, and as supervisors and regulators get a clearer sense of what needs to be included in mandatory processes.

Cover photo by Denys Nevozhai on Unsplash.
Acclimatise becomes an official endorser of the Principles for Responsible Banking

Acclimatise becomes an official endorser of the Principles for Responsible Banking

Acclimatise are delighted to officially endorse the UNEP FI Principles for Responsible Banking (PRB), a single framework working towards a sustainable banking industry.

The PRB sets out a framework of six principles which encourage the banking industry’s role and responsibility in shaping a sustainable future by aligning the sector with the goals and objectives of the SDGs, the Paris Climate Agreement, and other relevant national frameworks. The principles have been developed by 30 leading global banks and members of the UNEP FI through a consultative process with over 250 banks over a period of 6 months, and will be officially launched on 22nd September 2019 during the annual United Nations General Assembly in New York City.

The principles require signatory banks to take 3 key steps:

  1. Impact analysis;
  2. Target setting; and
  3. Implementation and accountability.

Following these steps, signatories are required to set and publish targets in line with sustainable goals and be transparent and accountable by publicly reporting on their positive and negative impacts. The Principles enable a bank to embed sustainability across all its business areas, and to identify where it has the potential to make the most impact in its contributions to a sustainable world. Signatories to the PRB will have the competitive market advantage to leverage new business opportunities in the emerging sustainable development economy.

Acclimatise recognises the importance of greening financial flows as a systemic approach to building resilience to climate change. We have worked with financial institutions (FIs) to develop methodologies, and build capacity, to assess physical climate risks and opportunities in financial portfolios. Beyond this, we are supporting financial institutions’ efforts in implementing the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations. As an official endorser of the PRB, Acclimatise is pleased to see banks commit to these actions and further leverage their efforts in greening the financial system.

“As a specialist advisory and analytics company working on climate risk management in the real economy and with financial institutions for over 15 years, we have long since been proponents of private sector action to build climate resilience. We welcome the PRB as a renewed effort by banks to step into the role they play in developing sustainable economies and societies.”

John Firth, Acclimatise CEO and co-founder

More than 65 organisations have already endorsed the PRB, putting it on track for becoming the industry standard in the banking sector, with banks committing to align their strategies, portfolios and business practices with the UN Sustainable Development Goals (SDGs) and the 2015 Paris Climate Agreement. By the time of its official launch on 22nd September 2019, over 150 banks and banking industry institutions are expected to become signatories to the PRB through an innovative partnership between banks worldwide and UNEP FI.

“It is fantastic to see this coalition growing so quickly. The Principles for Responsible Banking are rapidly setting the global standard for what it means to be a responsible bank. We invite banks that haven’t endorsed them yet to join and show their commitment to the sustainable banking system of the future.”

Simone Dettling, head of the Banking team at UNEP FI

To learn more about how your bank can sign up to the PRB, and how this relates to climate action you are taking, please contact:

Robin Hamaker-Taylor, Policy and Risk Analyst, Acclimatise, Email:

Will Bugler, Senior Communications Consultant,  Acclimatise, Tel: 07726665908, Email:

Cover photo by Robert Bye on Unsplash.
Climate change adaptation is the “biggest investment opportunity of this generation,” says new UNEP FI report

Climate change adaptation is the “biggest investment opportunity of this generation,” says new UNEP FI report

By Will Bugler

The UNEP Finance Initiative launched last month a technical background paper on adaptation finance which identifies barriers and opportunities for scaling up financing for climate change adaptation and resilience building. The paper, ‘Driving Finance Today for the Climate Resilient Society of Tomorrow’ refers to adaptation as “the biggest investment opportunity of this generation” with huge investment needs to build social and economic resilience.

The report was authored by an expert team led by Stacy Swann and Alan Miller of Climate Finance Advisors, with contributions from a review panel that included Acclimatise CTO Dr Richenda Connell and CEO John Firth who were joined by other experts from banking, investment, insurance, academia and government.

The release of this paper is a prelude to the first flagship report of the Global Commission on Adaptation (GCA), which is due to be presented on the 23rd September. Launched last year, the GCA aims to accelerate adaptation action, raising it up the political agenda and encouraging bold solutions such as smarter investments, new technologies and better planning.

The ‘Driving Finance Today’ paper identifies the barriers to scaling up financing for adaptation which include weak policies and conventions in the financial industry and a low technical capacity for climate risk management amongst others. It reflects the fact that despite a great deal of demand for climate adaptation finance, with UN estimates suggesting that by 2030 it will take $140 to 300 billion of investment per year to strengthen the resilience of societies and economies to climate change, progress to mobilise funding has been slow.

The paper also identifies a range of opportunities to accelerate the investment required to prepare the planet for climate change, though these face additional barriers such as the perceived lack of private benefits and the immaturity of business models. It presents six recommendations, with illustrative case studies, to promote resilience investment:

  1. Accelerate and promote climate-relevant financial policies;
  2. Develop, adopt, and employ climate risk management practices;
  3. Develop and adopt adaptation metrics and standards;
  4. Build capacity among all financial actors;
  5. Highlight and promote investment opportunities; and
  6. Use public institutions to accelerate adaptation investment.

Collectively, these recommendations provide the outline of a program that is ambitious, actionable, and can directly impact how finance can be unlocked for adaptation and resilience.

Download the UNEP FI / GCA background paper on adaptation finance here.

Listen to the webinar held for the launch of the paper here.