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The Imperative of Climate Risk Analysis for Climate Reporting

By: Nadav Avihay, Manager, ESG Consulting Services

In an era where environmental concerns are at the forefront of global discourse, many discussions, such as those at Climate Week and co-hosted events, have amplified the importance of corporate transparency and accountability in reporting on and addressing climate-related issues. All too often this dialog falls short in providing the tools and expertise for doing so.

At the core of climate-related financial risk disclosure lies a comprehensive climate risk assessment or analysis (CRA). A CRA is an essential process for identifying material impacts, risks, and opportunities related to climate change, and developing accurate and timely disclosures that meet the expectations of regulators and investors. Alignment with globally recognized standards, such as the International Sustainability Standards Board (ISSB) IFRS S2 or the Task Force on Climate-related Financial Disclosures (TCFD) – as recommended by the recently passed California Senate Bill 261 and anticipated from the SEC – is also central to transparent and credible climate risk disclosure.

A comprehensive CRA is essential for corporate climate action plans and reports for several reasons:

  • Identifying Material Impacts: Evaluate risks and opportunities that are material to your organization and stakeholders. That includes both physical risks, such as extreme weather events and resource scarcity, and transition risks related to market, policy, legal, and technological changes.

  • Assessing Impact on Climate and Environment: Understand your company’s contributions to climate change and environmental degradation. This involves gauging carbon emissions, water usage, and other environmental metrics.

  • Mitigating Risks and Seizing Opportunities: Identify potential threats and reveal opportunities for innovation and sustainable practices, while leveraging this information to align business strategies and performance.

  • Meeting Regulatory Requirements: A well-conducted CRA helps ensure compliance and proactively positions your organization to adapt swiftly to evolving standards and stakeholder expectations.

To meet regulatory and stakeholder expectations for transparency and accountability in reporting and addressing climate-related issues, a CRA is a powerful tool to unify your ESG strategy, financial risks, and stakeholder communications into a clear and coherent narrative. This approach streamlines internal teams and messaging and strengthens your organization's credibility by presenting a consistent and actionable vision that reflects proactive engagement with the multifaceted challenges and opportunities posed by climate change.

To learn more about what this process entails, and how it might be beneficial for your company, please reach out to one of our ESG experts today.


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