Climate risk assessment & TCFD gap analysis

Case Study

CLIMATE RISK ASSESSMENT AND TCFD DISCLOSURE GAP ANALYSIS

In response to increased investor interest in climate risk and these risks being placed among the fiduciary duties of directors, our client’s Board was seeking to gain an understanding of how the organisation was situated in relation to assessing and managing climate-related risk and opportunities, with a specific focus on financial impacts and potential related public disclosures.

Our work involved a number of steps. Firstly, we reviewed a number of internal and external documents to gather an understanding of the client’s operational and strategic context. Our understanding of the client’s business environment then shaped a high level ‘top down’ vulnerability assessment to identify high priority climate-related risks and opportunities. As part of this process, Point Advisory designed and facilitated a workshop with key executives and senior managers from the client’s strategy, risk, supply chain, capital management and sustainability teams to explore the organisation’s critical functions (i.e. “what matters most”) and how those functions could be impacted, positively or negatively, by climate-related risks and opportunities.

We also reviewed several public disclosures (including annual report, sustainability report, CDP and CDWP submissions, corporate governance statement, profit reports, etc.) to identify gaps in relation to the TCFD recommendations on climate-related financial disclosures. The outcome of this analysis provided the client with an indication of their readiness to disclose against each TCFD recommended disclosure and the work effort required to fill in the gaps.

The final deliverable consisted of a briefing paper to the Board outlining:

• identified priority climate-related financial vulnerabilities and opportunities (both transitional and physical) for the client’s consideration;
• the outcomes of the disclosure gap analysis against the TCFD recommendations (including relevant supplemental guidance); and
• a set of pragmatic recommendations with an indication of their level of priority, the benefit to the business and the TCFD core element being addressed.

This briefing paper was recently presented to the Audit and Risk Management Committee (‘ARMC’), who welcomed the level of detail provided and the set of clear and prioritised recommendations. As a result, the Committee requested the risk and sustainability leaders in the business to develop an action plan to address the recommendations and present it to the ARMC in the next meeting.

For further information contact Marisa Sánchez Urrea.