Date posted: 13/03/2018 5 min read

The significance of climate-related risks for business

Understand the recent developments for climate-related financial disclosures and what this means for your business

In brief

  • Taskforce for Climate-related Financial Disclosures hosted an implementation workshop in Australia
  • TCFD disclosures will involve cross-functional teams including sustainability, finance and risk
  • Watch the recording of our webinar for accountants about climate-related financial disclosures

Early 2018 has seen a significant increase in activity surrounding climate-related financial disclosures. Chartered Accountants Australia and New Zealand was invited to attend the only Australian implementation workshop held by the Taskforce for Climate-related Financial Disclosures (the TCFD).

The Financial Stability Board of the G20 convened the Taskforce for Climate-related Financial Disclosures (the TCFD) to provide information to investors and financial institutions to assist them in making informed decisions, reducing the impact of climate change on global financial stability.

There were 55 participants from 34 Australian and global organisations present at the workshop. The workshop included presentations from TCFD member Fiona Wild as well as from KPMG and advanced adopters ANZ and BHP.

 

"Risk areas previously considered to be 'non-financial' are now generally accepted to have financial consequences"
Karen McWilliams Ethics and Sustainability leader, Chartered Accountants ANZ

 

Ms Wild noted the strong momentum behind the TCFD with public support from 237 companies with a combined market capitalisation exceeding USD 6.3 trillion. The workshops are to help organisations with the next steps towards making tangible actions and dealing with some of the challenges associated with the TCFD recommendations. These include quantification, defining time frames and gathering the right mix of skill-sets.

Adrian King, KPMG partner outlined the importance for organisations to ensure they have good governance processes set up and then identifying, assessing and managing climate-relate risks and opportunities before decision useful disclosures can be made. The pathway to full TCFD adoption is likely to take 3-5 years.

Experiences from early adopters

Both ANZ and BHP representatives shared their experiences as early adopters of climate-related risk disclosures. Initially, both organisations developed their strategies in this area through engagement with diverse stakeholders, both internal and external. Demonstrating a commitment to this strategy at a high level was important as well as ensuring it was consistently applied to all activities and decisions.

Scenario analysis was used to test outcomes between what is expected to happen (forecasts) and what might happen. The importance of early engagement with the finance function was noted, as TCFD disclosures are to be included within the financial filings. Disclosures have been incorporated into the financial filings, not necessarily in one place but a ‘sign post’ page was included to provide the link to where more details could be found.

 

What impact will this have on Chartered Accountants?

In our role as Accountants and Business Advisors, it is important to understand that risk areas previously considered to be ‘non-financial’ are now generally accepted to have financial consequences and so they need to be aware of how these risks impact organisations and the recommended disclosures.

The TCFD disclosures are to be included within an organisation’s financial filings, which is the domain of our members. A key takeaway from the workshop was the need for cross-functional teams to be involved in TCFD disclosures. This includes sustainability, risk and finance teams.

Professional Accountants have the skills and expertise to prepare and assure information included in financial filings and to assess and manage an organisation’s risk.

Where can you find out more?

Through the Strategic Alliance with ACCA, CA ANZ and ACCA are working together on important areas like this. Members of both organisations can watch the following recording of a webinar for accountants hosted by the Climate Disclosure Standards Board.

This webinar includes presentations from global experts exploring the significance of climate related risks to business and provides an overview of why climate related financial disclosures are becoming more mainstream.  It also explores the possible implications for the accounting profession.

Climate risks and new recommendations

Access the webinar for accountants on the importance of climate-related risks for business

Watch here