How do you report climate change risks to investors?

Hire consultants or experts in this field to develop KPIs. Employers risk reporting intangible metrics relating to climate and sustainability when they’re unfamiliar with the subject matter which can contribute to appearing like the organization is just “greenwashing”, upsetting consumers, shareholders, investors, future investors etc.

provide a clear and concise overview of your organization's exposure to climate-related risks and opportunities. Start with a comprehensive assessment of physical, transitional, and reputational risks, using relevant metrics and scenario analysis. Clearly outline your mitigation and adaptation strategies, including emissions reduction targets, green investments, and risk management practices. Emphasize alignment with international climate agreements, regulatory compliance, and disclosure frameworks like TCFD. Present data in a visually engaging format, including charts and graphs, and convey the financial implications of climate risks. Lastly, emphasize your commitment to sustainability, resilience, and long-term value creation.

Climate change risk reporting is crucial for several reasons. It allows investors and regulators to understand how climate change affects the financial performance and resilience of companies and sectors. It also helps companies to manage their exposure to physical and transition risks from climate change, and to take advantage of opportunities from low-carbon transition. Moreover, it supports the alignment of financial flows with the goals of the Paris Agreement and the global efforts to mitigate and adapt to climate change. Furthermore, it enhances transparency, accountability, and stakeholder engagement on climate-related issues.

I recommend organizations adopt climate risk analysis tools, particularly for assessing physical climate risks. These tools are backed by climate scientists who analyze historical data and projections. Accurate risk identification is essential for effective risk mitigation and the pursuit of opportunities.

The effects of climate change on the natural world, human society, and the economy are called climate change risk. To find out how climate change can affect different aspects of life, we need to look at both the physical dangers and the social and economic consequences of a changing climate. There are various ways to do this, such as: The TCFD framework is a set of guidelines for reporting how climate change can create risks and opportunities for financial activities. The VMIA Climate Change Risk Management approach uses the principles of risk management to help organizations deal with climate change. These are some examples of how to find out climate change risk.

Addressing climate change risks is not just a moral imperative; it's a strategic necessity. Identifying and assessing these risks is crucial for a company's resilience and long-term success. By doing so, businesses can make informed decisions, adapt, and contribute to a more sustainable future while safeguarding their own interests and those of their stakeholders.

Measuring and managing climate change risks is not just about compliance; it's a path to competitiveness and sustainability. Quantifying these risks and embracing opportunities not only enhances a company's environmental performance but also its financial health. It's a win-win, benefiting the planet and the bottom line. Companies that integrate climate risk management into their strategies are better positioned for the future.

To measure, correct, and ensure that we are truly making changes in our corporate structure, it's crucial to have indicators. Some examples are KPIs, but what matters here isn't their name but rather the flexibility, measurement frequency, the target audience for the indicator, and how much significance we assign to it as a company and within the system. The success and outcomes we achieve depend on these factors.

For a correct measurement of climate change risks, is vital that your exisiting KPIs have been properly set. You cannot measure what you don't fully know or fully understand. This is about seting SMART goals first to be able to track progress and enable measurement. Now, how to measure? This is a key part of your risk managemet strategy and will be defined by your sectorial or individual approach. I can think of some approaches like: emissions-based, alignment-base or even contribution-based.

The European Sustainability Reporting Standard (ESRS) is relevant as a disclosure standard in the European Union. It has just been published on 31 July 2023.

Transparent climate change risk disclosure is not just an ethical gesture; it's a fundamental building block of trust and accountability. Companies that openly share their climate strategies and actions empower stakeholders to make informed decisions, foster investor confidence, and drive positive change. By adhering to established frameworks, they ensure consistency and credibility in reporting, which is essential for a sustainable future and responsible corporate citizenship.

Disclose risks along with mitigation strategies and potential opportunities to offer investors a complete perspective. Climate risk assessment tools often provide risk assessments without factoring in site-specific mitigation measures. For instance, a climate risk tool may indicate that the risk of extreme temperatures poses a 30% threat to asset value due to rising cooling costs. However, these risks can be mitigated by implementing efficient cooling systems and securing long-term renewable energy contracts to leverage future opportunities, especially in the face of potentially high grid energy prices.

Engagement with investors and stakeholders on climate change is not just a checkbox; it's a dynamic dialogue that drives progress. By actively involving them, companies can tap into valuable insights, build trust, and foster collaboration. Listening to concerns, sharing successes, and seeking partnerships amplify the impact of climate risk management efforts. It's a collective journey towards a sustainable future, and collaboration is the compass guiding us in the right direction.

"Banks, insurers, asset managers and institutional investors are the driving force of greening the financial system". This is the reason why is so important to engage with them timely and properly. Much has been discussed in which are the best strategies for engagement. In my experience, I can think in a mix of: constant and effective communication and impact investing. However you do it, make sure to deliver clear messages and tangible results. Make use of your sustainability reporting KPIs to engage your investors in your climate journey, fostering accountability and trust.

A fact-supported, secure stance, with concrete evidence and case examples, will always guide us to explore new possibilities. We can start with a short-term commitment, renewing agreements as needed. This approach will help us convince others about the realities, benefits, and costs of not transitioning due to climate change.

An additional consideration is understanding how the climate risks are a multiplier for existing enterprise risks to create new risks. Considering the nexus between climate change risk and nature/biodiversity risks. Increasing organizational system intelligence to report comprehensive on all the internal and  external  risks for the business corporation. Benchmark your reporting against best practices and find ways to improve continuously on your efforts on this dynamic landscape.

At present, due to uncertainties associated with tools, models available etc. the investors are not looking for accurate numbers to quote. So, dont wait for perfect models with accurate results to be available. Taking first steps helps create lot of internal capacity through inter-departmental discussions and brings to highlight some risks. Also, these voluntary exercises help in preparation of upcoming regulations in the climate risk reporting e.g. from market regulators or governments. In improving the reporting, subsequent to the first steps, one can always look show resilience to different scenarios through appropriate steps and transition planning, keeping budgets for the implementation of mitigation measures.

Climate risk reporting is a continuous journey, not a destination. Staying updated, learning from others, and embracing innovation is the key to progress. The climate landscape is ever-changing, and companies must evolve their reporting practices to remain relevant and effective. Sharing experiences and best practices within and beyond your industry is a powerful way to collectively address this global challenge. In this ongoing process, we'll find the resilience and solutions needed for a sustainable future.