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Podcast: Legal implications of climate change are a big deal for corporates says legal analyst Marcela Scarpellini

Podcast: Legal implications of climate change are a big deal for corporates says legal analyst Marcela Scarpellini

Climate change and its impacts cause hundreds of billions of dollars of damage each year. As the scale of losses increases, so too will the number of legal cases apportioning blame to those most responsible. There have already been over one thousand litigation cases related to climate change, a number that is expected to rise dramatically as climate change continues, and legislation and regulations increase. However, there is another factor driving the number of legal cases: advances in climate science and the tools to interpret it.

When it comes to litigation, it is important to be able to identify some sort of loss, and also attribute that loss to the actions, or non-actions, of a legal entity. In the past it has been difficult to apportion blame for climate change impacts to individual companies or governments. It has also been difficult to argue that their failure to act to build resilience to climate change constitutes negligence that has led to a specific loss. However, as the science of climate change advances, a new suite of tools is changing all of this.

In this interview we speak with Marcella Scarpellini, a lawyer and legal analyst at right. based on science, a climate metrics and data services provider that is helping companies manage the financial risk of climate change. The company has developed its X-Degree Compatibility (“XDC”) tool, a science-based climate metric that estimates how many °C the Earth would warm by 2050 if all companies were to operate as emissions-intensively as the company under consideration.

The XDC tool can be used by companies, investors, governments or others who want to better understand their contribution to climate change, and gauge how to best respond. It is also useful for lawyers to hold companies and governments to account, showing whether they are contributing to a wold of 1.5˚C and in line with the Paris Agreement or a much hotter world where climate damages will be significantly higher.

“For corporates [climate change] is going to be big” Marcella said “As climate change increases the search for culprits is also going to increase… we know that there is causality between emissions and climate change, so people are going to start pointing fingers. I think for companies it will be in the forms of fines and penalties, of course litigation, and even class action damages are expected.”


Cover photo of Hurricane Katrina Damage / From Wikimedia Commons
Webinar: How can EO data support climate resilient development?

Webinar: How can EO data support climate resilient development?

The European Space Agency’s Earth Observation for Sustainable Development (EO4SDClimate Resilience Cluster is holding a webinar to demonstrate the potential for Earth Observation to contribute to climate resilient development objectives.

The webinar “How can EO data support climate resilient development?”  will take place twice on the 11th June 2019:

  • 10-11 am CEST / 3-4 pm PHT
  • 3-4 pm CEST / 9-10 am EST.

Register for your preferred time. Download and share the webinar invitation.

Climate change impacts and sustainable development

The UN Sustainable Development Goals, Paris Agreement, and numerous regional and national level development plans and strategies are explicit about the potential for climate change and its impacts to derail development efforts and reverse the trend of declining global poverty.

However, developing a picture of how climate impacts affect the environment and society can be difficult, especially in regions where data is missing, incomplete or inaccurate. Earth observation (EO) data helps in this regard by providing timely and accurate information in large quantities about the Earth’s atmosphere, landmasses, and oceans.

Combined with socio-economic data, EO data can provide useful information that can show potential climate risks and allow decision makers to develop strategies to build resilience. Since 2008, the European Space Agency has worked closely with International Financing Institutions (IFIs) and their client countries to harness the benefits of EO in their operations and resources management.

About the EO4SD initiative

Earth Observation for Sustainable Development (EO4SD) is an ESA initiative which aims at increasing the uptake of EO-based information in regular development operations at national and international level. Over the past year, the ESA EO4SD – Climate Resilience Cluster – has been working with IFIs to develop an EO-based integrated climate screening and risk management service and build capacity in IFI client states so that stakeholders can use EO-based information for climate resilient decision making.

Embracing uncertainty: How disclosing uncertain information on climate risk can reduce legal liability exposure

Embracing uncertainty: How disclosing uncertain information on climate risk can reduce legal liability exposure

By Marcela Scarpellini, right. based on science UG

As climate related damages increase, the need to allocate funds and apportion blame will inevitably follow. In this context, the mechanisms used for determining responsibility are likely to become, to say the least, very creative.

Pressure for proactive climate action and better response is mounting thanks to legislation and regulation, litigation, shareholder demands, citizens calling for more action, carbon taxes and concrete mitigation and adaptation plans.

The status and intent of current regulations relating to climate change and the legal infrastructure that is expected to support or deter the transition to a low carbon economy, provide a good indication of the stringency and certainty of the measures that will follow.

After Bank of England Governor Mark Carney’s famous warning in his 2015 speech regarding the threat climate change posed to our financial systems, financial institutions and governments started to wake up to the issue. This meant paying attention to – and developing an understanding of – how climate risks might play out and affect businesses future profitability and the stability of the wider financial system. In response, the G20’s Financial Stability Board established the Task Force on Climate-Related Disclosures (TCFD).

Point in time: Disclosure

The TCFD‘s purpose is to provide corporates and financial institutions with a framework for climate risk disclosure in two key respects. First, with regard to the analysis of the physical and transition risks and opportunities they may face due to climate change. Second, with regard to the development of appropriate strategies to respond to the consequences of those risks materialising.

This initiative, which already has 513 official supporters across businesses, advisory firms, and financial institutions, is a voluntary framework. The main political intention behind it – in combination with the EU Directive on Non-Financial Disclosures, EU Shareholders Directive and other upcoming EU financial regulation – is to foster transparency by requiring corporates and financial institutions to disclose information on material impacts of the physical and policy risks (transition risks) connected with climate change.

The TCFD recommendations are just a first step. Increasing transparency is a means to an end, not an end in itself: boilerplate and vague disclosures will not cut it. The intention of climate risk disclosures is to provide legislators with a broad understanding of the current state of investments and business bets into a certain world, in order to come up with evidence-based legislation that actually has a chance of reshaping our economies.

In this context, corporates and financial institutions have started to work out the best ways to generate relevant disclosures. The first attempts to generate this information using the TCFD framework have been released, but there is still a long way to go.

Hot topic: scenario analysis

One of the challenges of applying the TCFD framework has been the use of scenario analysis. Scenario-analyses are forward-looking tools intended to allow users to imagine how a range of possible futures could look, the risks and opportunities entailed in those different futures and get its users to pin down how their companies would be affected if any of those futures materialized. The overarching purpose is to enable firms to develop strategic and resilient business plans to incorporate envisioned or possible changes.

A concrete way in which companies make use of scenario analyses is by using them to understand how their capital requirements might be impacted under a range of plausible scenarios. Using scenario analyses, companies can peer into the future and build resilient responses to a world in which extreme events and their financial impacts are no longer sporadic but recurrent.

Scenario analysis is a time and capacity consuming challenge. Despite this, many companies, particularly within the oil & gas sector, have been using these tools for some time, and companies in other sectors are starting to do so too.

Another significant hurdle for companies performing scenario analysis stems from having to disclose the information generated. Many businesses are wary of this since, it is suggested, the information generated by scenario analysis is just hypothetical, which could, in turn, be misconstrued as a fraudulent, deceptive or incorrect disclosure, potentially opening the door to liability exposure. However, in reality, this constitutes a narrow view of the story.

Understanding risk

Properly understood, scenario-analysis is a risk assessment tool, so the information derived from it is the same in nature as information relating to other risks that might affect a company. Risks are hypothetical by nature and gain validity when substantiated through evidence and justification.

What it takes to reduce disclosure-related liabilities is a thorough and well-presented substantiation of the information provided, with clear and precautionary wording regarding how this information ought to be interpreted and construed.

A stream of forward-looking legal experts, within the Commonwealth Climate and Law Initiative, are of the opinion that disclosing forward-looking information in line with the TCFD Recommendations might, on the contrary, reduce liability exposure. Their claim is justified by understanding the core intentions of the TCFD’s recommendations, namely transparency and accountability. Therefore, firms able to demonstrate that they are acting to understand and manage climate risk will be acknowledged for that in the light of corporate responsibilities such as due diligence and good corporate governance. In understanding the purpose of disclosure, firms are allowed to make mistakes, though they are not allowed to be fraudulent, deceptive and manipulative about the future in order to ensure certain business interests.

As more firms get on board with the TCFD recommendations, using them as guidelines for disclosure, it is likely that they become reference points and that national laws start to be interpreted in light of the most advanced practices. In jurisdictions such as the UK, where an objective test applies to determine the extent and manner in which directors have exercised their duty of care and due diligence, this determination is likely to be done on the basis of what others in the industry are doing. If and when TCFD becomes best-practice, this is likely to become the yardstick against which these determinations will be made[1].

Good practice to reduce liability

Scenario-analysis remains a beneficial tool, despite the fact that it is still becoming an established best practice and mandated by law. To reduce firms’ concerns around liability associated with scenario-analysis, and to encourage them to start using it and disclosing climate risk information prudently, a series of recommendations follows:

  • Use proper cautionary language.
  • Use a variety of scenarios, at least three would be advisable.
  • Place all scenarios within the same section and under the same fonts in your disclosure as to avoid that any be interpreted as being favoured.
  • Use multiple sources for data and narratives and seek insights from new sources.
  • Use current data and justify your choice of providers.
  • Ensure your scenarios reflect the variance (climate, political, social, regulatory) and are relevant to the entirety of the company´s operations.
  • Use information derived from scenarios in order to justify likelihood and not infallible certainty.
  • Not disclosing any forward-looking information under the false pretence that it might make your company liable is a greater risk than disclosing uncertain information.
  • If you are not sure of how to go about it, hire consulting services to guide you along the way.

Further reading:

https://www.right-basedonscience.de/2017/08/04/better-safe-than-sorry/

Marcela Scarpellini studied law at the Universidad Católica Andrés Bello in Caracas (Venezuela) and has an LL.M. from the University of Stockholm (Sweden) in the field of environmental law. Within right.based on science (“right.”) she works at providing the legal context upon which right.´s X-Degree Compatibility (“XDC”) model and other metrics are developed.

right. based on science is a data provider founded in August 2016, which measures a single economic entity’s contribution, be that of e.g. a company or a lending project, to manmade climate change. With a team of experts with backgrounds in law, science, economics, psychology and mathematics, right. is devoted to the development of the XDC Model, which calculates science-based climate metrics on the basis of latest climate research and regulatory requirements, in order to deduct an entity’s X-Degree Compatibility.


[1] Concerns misplaced: Will compliance with the TCFD recommendations really expose companies and directors to liability risk? Alexia Staker, Alice Garton & Sarah Barker. Commonwealth and climate law initiative.


Photo by Krissana Porto on Unsplash

Glaciers’ global melt may leave Alps bare

Glaciers’ global melt may leave Alps bare

By Tim Radford

Many of the planet’s most scenic – and most valued – high-altitude landscapes are likely to look quite different within the next 80 years: the glaciers’ global melt will have left just bare rock.

By the century’s end, Europe’s famous Alps – the chain of snow- and ice-covered peaks that have become a playground of the wealthy and a source of income and pleasure for generations – will have lost more than nine-tenths of all its glacier ice.

And in the last 50 years, the world’s glaciers – in Asia, the Americas, Europe, Africa and the sub-Arctic mountains – have lost more than nine trillion tonnes of ice as global temperatures creep ever upwards in response to profligate combustion of fossil fuels.

And as meltwater has trickled down the mountains, the seas have risen by 27mm, thanks entirely to glacial retreat.

“Present mass-loss rates indicate that glaciers could almost disappear in some mountain ranges in this century”

In two separate studies, Swiss scientists have tried to audit a profit and loss account for the world’s frozen high-altitude rivers, and found a steady downhill trend.

Glacial ice is a source of security and even wealth: in the poorest regions the annual summer melt of winter snow and ice banked at altitude can guarantee both energy as hydropower and water for crops in the valleys and floodplains.

In wealthy regions, the white peaks and slopes become sources of income as tourist attractions and centres for winter sport – as well as reliable sources of power and water.

Swiss focus

In the journal The Cryosphere, a team from the Swiss Federal Institute of Technology, almost always known simply as ETH Zurich, looked into the future of the nation’s own landscape, and beyond.

They made computer models of the annual flow of ice and its melting patterns and took 2017 as the reference year: a year when the Alpine glaciers bore 100 cubic kilometres of ice. And then they started simulating the future.

If humankind kept the promise made by 195 nations in Paris in 2015, to drastically reduce fossil fuel use, lower emissions of carbon dioxide, restore the forests and keep global warming to no more than 2°C above historic levels, then the stores of high ice would be reduced by more than a third over the next eight decades. If humankind went on expanding its use of fossil fuels at the present rates, then half of all the ice would be lost by 2050 and 95% by 2100.

Time lag

But there will be losses in all scenarios: warming so far has seen to that. Ice reflects radiation and keeps itself cold, so change lags behind atmospheric temperature.

“The future evolution of glaciers will strongly depend on how the climate will evolve,” said Harry Zekollari, once of ETH and now at Delft University of Technology in the Netherlands, who led the research. “In the case of a more limited warming, a far more substantial part of the glaciers could be saved.”

The Alpine glaciers were made world-famous first by Romantic painters and poets of the 19th century, among them JMW Turner and Lord Byron. But their contribution to rising sea levels is, in a global context, negligible.

When Swiss researchers and their Russian, Canadian and European partners looked at the big picture, they found that the mass loss of ice from the mountains of Alaska,  Canada, parts of Asia and the Andes matched the increasing flow of water from the melting Greenland ice cap, and exceeded the flow of melting water from the Antarctic continent.

Europe’s modest melt

They report in Nature that glaciers separate from the Greenland and Antarctic sheets covered 706,000 square kilometres of the planet, with a total volume of 170,000 cubic kilometres, or 40 centimetres of potential sea level rise.

And in the five decades from 1961 to 2016, according to careful study of satellite imagery and historic observations, the seas have already risen by 27mm as a consequence of increasing rates of glacial retreat. This is already between 25% and 30% of observed sea level rise so far.

Europe did not figure much in the reckoning. “Globally, we lose three times the ice volume stored in the entirety of the European Alps – every single year,” said Michael Zemp, a glaciologist at the University of Zurich.

He and his colleagues warn: “Present mass-loss rates indicate that glaciers could almost disappear in some mountain ranges in this century, while heavily glacierised regions will continue to contribute to sea level rise beyond 2100.”


This article was originally posted on The Climate News Network and has been republished under Creative Commons.
Cover photo by Karl Koehler on Unsplash.
New project supports climate adaptation and resilience for Pacific Islands

New project supports climate adaptation and resilience for Pacific Islands

By Will Bugler

Fifteen Pacific island countries are part of the newly launched Pacific Adaptation to Climate Change and Resilience Building (PACRES) project under the Intra-African Caribbean Pacific (ACP) Global Climate Change Alliance Plus (GCCA+) Programme funded by the 11th European Development Fund’s (EDF). The EUR 12 million project aims to strengthen adaptation and mitigation measures at the national and regional level and support partner countries in climate negotiations and in implementing the Paris Agreement on climate change.

Jointly implemented by the Secretariat of the Pacific Regional Environment Programme (SPREP), the Pacific Community, the Pacific Islands Forum Secretariat (PIFS) and the University of the South Pacific, the project will also have a disaster resilience component. Some of the activities of the project, according to SPREP, include knowledge sharing, strengthening of networks, and trainings and research opportunities.

An inception and planning meeting for the project was held from 1-3 April 2019 at the SPREP Campus in Samoa.

The Cook Islands, the Federated States of Micronesia (FSM), Fiji, Kiribati, Niue, Nauru, Palau, Papua New Guinea (PNG), the Marshall Islands, Samoa, Solomon Islands, Timor-Leste, Tonga, Tuvalu and Vanuatu participate in the project.


Photo Credit: Gemma Longman

Ocean productivity at risk as climate warms

Ocean productivity at risk as climate warms

By Tim Radford

Runaway climate change will alter the pattern of ocean productivity and circulation and play perhaps irreversible havoc with fish catches.

LGlobal ocean productivity – the annual bloom of algae and the cornucopia of molluscs, shrimp, krill, squid, fish and marine mammals that depend on this flowering of the blue planet – could be in serious decline by 2300,  thanks to climate change.

The harvest from the North Atlantic could fall by almost two thirds. The decline in the Western Pacific could drop by 50%. The overall productivity of the oceans from pole to pole will be at least 20% less.

Global warming that is already melting the ice caps and increasingly making the seas more acidic has been blamed for changes in fishery hauls and damage to reef ecosystems.

But the latest study looks not at the immediate consequences of profligate human combustion of fossil fuels, but at the very long-term consequences of turning up the planetary thermometer.

Scientists report in the journal Science that three centuries of continuous rise in carbon dioxide levels in the planet’s atmosphere, as a consequence of fossil fuel combustion, could raise global average temperatures by 9.6°C.

This is ten times the warming already observed. It will change wind patterns, melt almost all the sea ice and increase ocean surface temperatures.

And with this increase in temperature comes change in the growth of phytoplankton, on which ultimately all marine life depends. There will be shifts in ocean circulation that will take nutrients from the surface and deposit them in the deepest waters.

Antarctic waters could become richer in nutrients. But the world’s human population is centred in the northern hemisphere. “Marine ecosystems everywhere to the north will be increasingly starved for nutrients, leading to less primary production by phytoplankton, which form the base of ocean food chains,” said Keith Moore, an earth system scientist at the University of California, Irvine, who led the study.

“By looking at the decline in fish food over time, we can estimate how much our total potential fisheries could be reduced.”

Research of this kind is based on computer simulation of an entire planetary ocean system over the next 280 years. Leaders from almost all the world’s nations vowed in Paris in 2015 to contain global warming, and other studies have shown that world commercial fisheries would benefit from such action.

Delayed response

But time is running out: the oceans have yet to respond fully to the greenhouse gases that have already built up in the atmosphere in the last century or so.

“The climate is warming rapidly now, but in the ocean, most of that added heat is still right at the surface. It takes centuries for that heat to work its way into the deeper ocean, changing the circulation and removing the sea ice, which is a big part of this process,” Dr Moore said.

“This is what’s going to happen if we don’t put the brakes on global warming, and it’s pretty catastrophic for the oceans.

“There is still time to avoid most of this warming and get to a stable climate by the end of this century, but in order to do that, we have to aggressively reduce our fossil fuel use and emissions of greenhouse gas pollutants.”


This article first appeared on the Climate News Network.

Photo by Lalo on Unsplash

New York’s poor and ethnic minority neighbourhoods to be hit hardest by climate change finds NYC Panel on Climate Change

New York’s poor and ethnic minority neighbourhoods to be hit hardest by climate change finds NYC Panel on Climate Change

By Will Bugler

The New York City Panel on Climate Change (NYCPCC), released last month, its 2019 report on the science of climate change and its implications for New York City. The report finds that climate change is affecting everyday life in New York today, and that climate impacts will continue to increase over the coming decades, hitting the poorest neighbourhoods hardest.

The NYCPCC, which has been helping NYC prepare for climate change since 2008, found that extreme weather events are becoming more pronounced, high temperatures in summer are rising, and heavy downpours are increasing. The report finds that areas with lower incomes and the highest percentages of African American and Hispanic residents are consistently more likely to suffer the impacts of climate change. The panel advises that community engagement is critical for more effective and flexible adaptation efforts in the most at-risk communities.

The report serves as a “further wakeup call on the need to move urgently and take action on climate change” according to New York’s mayor Bill de Blasio. “This [report] shows what New Yorkers learned acutely during Sandy – climate change is real and an existential threat,” he said.

Records show that maximum daily summer temperatures have been rising at rates of 0.5°F per decade at JFK Airport and 0.7°F per decade at LaGuardia Airport since 1970. Sea level recorded at The Battery in lower Manhattan continues to rise at a rate of 0.11 inches per year since 1850. These changes are broadly in line with the climate change projections made by the NPCC in 2015.

The report also emphasises that climate change is already affecting the daily life of NYC residents, especially for those who live in coastal communities where nuisance flooding is becoming more frequent and for those who operate and use the city’s critical infrastructure during heatwaves and heavy downpours. Economic losses from hurricanes and floods have significantly increased in past decades and are likely to increase further in the future from more intense hurricanes and higher sea level rise.

“Recent scientific advances have allowed the NPCC to better detail climate vulnerabilities in the city, such as where nuisance floods might occur more frequently,” says William Solecki, co-chair of the NPCC. “This improved knowledge has, in turn, helped the panel craft new sets of tools and methods, such as a prototype system for tracking these risks and the effectiveness of corresponding climate strategies.”

One of those tools is the Antarctic Rapid Ice Melt Scenario, which the NPCC created to model the effects of melting ice sheets on sea level rise around NYC. The model predicts that under a high-end scenario, monthly tidal flooding will begin to affect many neighbourhoods around Jamaica Bay by the 2050s and other coastal areas throughout the city by the 2080s.

“The NPCC 2019 report tracks increasing risks for the city and region due to climate change,” says Cynthia Rosenzweig, co-chair of the NPCC and senior research scientist at Columbia University’s Earth Institute. “This report, the third by the NPCC in ten years, continues to lay the science foundation for development of flexible adaptation pathways for changing climate conditions.”

To help manage the dynamic climate and public policy contexts, the NPCC 2019 report recommends that the city put in place a coordinated indicator and monitoring system to enable the city and its communities to better monitor climate change trends, impacts, vulnerability, and adaptation measures. The report also notes that property insurance can be a catalyst for infrastructure resilience by encouraging investment in adaptation measures prior to a disaster through a reduction in premiums.

Other NPCC recommendations include:

  • continuing broad assessments of climate change across the metropolitan region with federal, state, and regional partners (for example, NOAA’s Consortium for Climate Risk in the Urban Northeast);
  • using updated methods for the next set of NPCC climate change projections; and
  • hosting a NYC Climate Summit once during every mayoral term.

Photo by Tommaso Ripani on Unsplash

The global law firm Clyde & Co. launches climate change liability risks report

The global law firm Clyde & Co. launches climate change liability risks report

By Nadine Coudel and Dr Richard Bater

In March 2019, Clyde & Co. launched its climate change report Climate change: Liability risks, a rising tide of litigation‘. The report explores the liability risks that organisations have faced and continue to face as plaintiffs attempt to use the courts to further their cause or sue for damages.

The report provides a broad overview of the evolving litigation risk landscape arising from the effects of climate change, identifying some of the key themes, controversies and legal hurdles.

The authors suggest that the significance of this trend should not be underestimated, with over 1200 climate change cases having been filed in more than 30 jurisdictions to date. As both litigation approaches and scientific evidence evolve, litigation increasingly represents a powerful tool in the hands of those who seek to attribute blame for contributing to effects of climate change or failing to take steps to adapt in light of available scientific evidence.

In as much as the physical risks of climate change raise both direct and indirect implications for a diversity of sectors, so too do the associated legal risks. As Clyde & Co Partner Nigel Brook remarks, “As the volume of climate change litigation grows and legal precedents build, new duties of care are emerging and the liability risk landscape is undergoing a shift which is likely to affect a wide range of commercial sectors”.

The authors classify litigation which has been emerging over the last two decades into three broad categories:

1. Administrative cases against governments and public bodies;

2. Tortious claims against corporations perceived as perpetrators of climate change;

3. Claims brought by investors against corporations for failing to account for possible risks to carbon-intensive assets or for failing to account for or disclose risks to business models and value chains in financial reporting.

The report also addresses novel approaches that claimants are adopting when bringing climate litigation, as well as the practical and legal considerations that these give rise to.

Finally, the report looks at global trends in climate litigation and their implications for businesses in different industries around the world, highlighting the issues which should be on companies’ radars over the months and years to come. The authors indicate that climate change litigation has already been deployed against companies beyond the oil and gas majors and suggest that this trend is likely to continue.

Litigation has advanced far from being targeted at first line ‘emitters’ to being used as a means of holding companies accountable for how they respond to the physical and financial risks of climate change. Clyde & Co. plans to explore these liability risks in greater depth in future reports.


Photo by Robert Bye on Unsplash

Update to landmark legal opinion highlights growing climate liability of company directors

Update to landmark legal opinion highlights growing climate liability of company directors

By Robin Hamaker-Taylor and Nadine Coudel

An update to the landmark 2016 Hutley opinion has been released by the Centre for Policy Development (CPD) on 29th March, 2019. The 2016 opinion set out the ways that company directors who do not properly manage climate risk could be held liable for breaching their legal duty of due care and diligence.

The supplementary opinion, provided again by Noel Hutley SC and Sebastian Hartford Davison on instruction from Sarah Barker, reinforces and strengthens the original opinion by highlighting the financial and economic significance of climate change and the resulting risks, which should be considered at board-level. It puts an emphasis on five key developments since 2016 that have built up the need for directors to take climate risks and opportunities into account and reinforced the urgency of improved governance of this issue. While the 2019 opinion is rooted in the Australian context, just as the 2016 opinion, it has much wider applicability, as much of the developments discussed in the update have been simultaneously happening in jurisdictions outside of Australia.

The five areas of development covered in the 2019 supplementary opinion include:

  1. Progress by financial supervisors: The 2019 opinion suggests statements made by Australian supervisory organisations such as the Australian Prudential Regulation Authority (APRA), Australian Securities and Investments Commission (ASIC) and the Reserve Bank indicate they now all see the financial and economic significance of climate change. Similar realisations have been happening among supervisory organisations in the UK, with the Prudential Regulation Authority (PRA) due to imminently release a supervisory statement on banks’ and insurers’ approaches to managing the financial risks from climate change, following a public consultation on the matter in late 2018 / early 2019. At the European level, the wider sustainability of the financial system is under review with the European Commission rolling out its Action Plan for Financing Sustainable Growth;
  • New reporting frameworks: Three new reporting frameworks have emerged since 2016. The most broadly applicable is The Task Force on Climate-Related Financial Disclosures (TCFD) recommendations. In June 2017, the TCFD, a task force set up by the Financial Stability Board in 2015, published its final recommendations to help companies disclose climate-related risks and opportunities. The Principles for Responsible Investing (PRI) and CPD frameworks have now both aligned their climate-reporting frameworks with the TCFD recommendations. The other two reporting frameworks mentioned in the 2019 supplementary opinion are more relevant for the Australian context, and include the new recommendations on assessing climate risk materiality from the Australian Accounting Standards Board (AASB) and the Auditing and Assurance Standards Board (AUASB), as well as the updated guidance from the ASX Corporate Governance Council;
  • Mounting investor and community pressure: Investors and community groups are increasing voicing concern around climate risks;
  • Development of the scientific knowledge: The UN Intergovernmental Panel on Climate Change (IPCC) published a special report on the impacts of 1.5 °C warming in 2018. The opinion recognises this as a “notable development in the state of scientific knowledge” that affects the gravity and probability of climate risks which directors need to consider; and     
  • Advances in attribution science: Important developments in attribution science have now made it easier to identify the link between climate change and individual extreme weather events.

The opinion suggests management of climate risks will require engagement with company directors in certain sectors in particular. These include banking, insurance, asset ownership/management, energy, transport, material/buildings, agriculture, food and forest product industries.

CPD CEO Travers McLeod, explains the implications of this supplementary opinion for company directors, stating “the updated opinion makes it clear that the significant risks and opportunities associated with climate change will be regarded as material and foreseeable by the courts. Boards and directors who are not investing in their climate-related capabilities are exposing themselves and their companies to serious risks”, according to a press statement.

Mr Hutley and Mr Hartford Davis write “the regulatory environment has profoundly changed since our 2016 Memorandum, even if the legislative and policy responses have not” […]“These developments are indicative of a rapidly developing benchmark against which a director’s conduct would be measured in any proceedings alleging negligence against him or her.”

The 2019 update to the 2016 landmark Hutley opinion also provides ample evidence as to why company directors all over the world not only need to be aware of their firms’ contribution to climate change – it is just as important to assess and disclose their potential climate risks in a transparent manner. It is therefore vital to ensure that future business plans are in line with the Paris Agreement and to also anticipate and prepare for climate change impacts, both in terms of risks and opportunities. The voluntary TCFD recommendations provide a framework for both corporates and financial institutions for assessing and disclosing climate risks and opportunities, and mandated disclosures are on the horizon. 


Acclimatise – experts in physical risk assessment and disclosures

Acclimatise has worked on physical climate risk and adaptation with corporates and financial institutions for over a decade, helping them identify and respond to physical risks and to take advantage of emerging opportunities generated by a changing climate. We have witnessed the corporate, societal and environmental benefits stemming from the promotion of resilience-building strategies.

To discuss how your organisation can meet TCFD or other disclosure requirements, please contact Laura Canevari: L.Canevari(a)acclimatise.uk.com

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PRI makes TCFD-style climate disclosures mandatory in 2020 reporting cycle

PRI makes TCFD-style climate disclosures mandatory in 2020 reporting cycle

By Robin Hamaker-Taylor

In February 2019, the Principles for Responsible Investing (PRI) initiative, announced it will make several of its climate risk indicators mandatory for PRI signatories. PRI requires signatories to annually report various environmental, social, and governance (ESG) metrics via the PRI reporting tool. In 2018, the PRI introduced TCFD-aligned indicators to its Reporting Framework, including reporting on four indicators of climate risks: governance, strategy, risk management, and metrics and targets. Until now, this reporting has been voluntary and disclose.  

Which indicators will be mandatory?

Starting in 2020, the PRI’s strategy and governance (SG) indicators will be mandatory to report, though it will remain voluntary to disclose responses publicly. These indicators include:

  • SG 01 CC: outline overall approach to climate-related risks;
  • SG 07 CC: provide overview of those in the organisation that have oversight, accountability and/or management responsibilities for climate-related issues; and
  • SG 13 CC: outline how strategic risks and opportunities are analysed.

PRI may require further climate risk reporting in the future

PRI currently has over 2,300 signatories, includingasset owners, investment managers, and service providers that collectively manage over $83 trillion in assets. This change in their reporting framework will greatly increase the amount of climate-related reporting within in its framework by signatories. This move also indicates the direction of travel regarding reporting on climate risks: the PRI has indicated that the remaining PRI climate risk indicators will stay voluntary with a view to becoming mandatory as good practice develops.

The climate change indicators of the overall Reporting Framework can be found here [pdf].

What is the PRI?

The PRI is a non-profit independent organisation that works to understand the investment implications of environmental, social and governance (ESG) factors. The PRI supports its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The organisation acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole.

What are the Principles for Responsible Investment?

The six Principles for Responsible Investment are a voluntary and aspirational set of investment principles that offer a menu of possible actions for incorporating ESG issues into investment practice:

Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.

Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.

Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.

Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.

Principle 5: We will work together to enhance our effectiveness in implementing the Principles. Principle 6: We will each report on our activities and progress towards implementing the Principles


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