Our TCFD Alignment

23rd August 2019

Author(s) – Vedanshi Singh

JointValues: Evaluating ESG and Climate Change disclosures by the companies in Asia-Pacific

Companies have been reporting the economic risks they face for decades and they often have a statutory responsibility to do so. Generally, the economic risks include the possible negative outcomes that may affect different ‘risk targets’, including the capital resources, net sales, revenues, income from continuing operations and future financial conditions among others.

Climate change is predicted to have possible negative outcomes that could affect any or all of these risk targets. There are both physical risks associated with climate change – those related to extreme weather events and changes in weather patterns – and risks associated with the transition to a low-carbon world. The latter include business risks such as new regulations on greenhouse gas emissions, upfront costs of transitioning to lower emissions technology, uncertainty in market signals and changing consumer preferences.

Though the climate change and environmental matters are classified as “non-financial” information, investors have started acknowledging that they contain material business risk and should be disclosed publicly through the mainstream corporate report, an annual document which includes financial statement and helps investors and stakeholders access the information they need about the company’s activity and financial performance.

The flip side of climate change

Tackling climate change and transitioning to a clean economy can also open numerous business opportunities. A few main categories of economic opportunities are understood to be; efficient production and use of resources, access to new markets, the development of new technologies and access to low-emission energy sources.

Task Force on Climate-related Financial Disclosures (TCFD)

The G20 Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) released recommendations, which highlighted the importance of using scenario analysis to assess climate change-related impacts within the financial sector.

The Task Force recommendations provide a clear and well-defined channel to the companies to bring climate change-related disclosures in mainstream financial reports.

TCFD is an industry-led initiative created to develop a set of recommendations for voluntary climate-related financial disclosures. These recommendations are aimed at all financial actors, from companies and investors to asset owners and managers, as the goal is to provide consistent and transparent information to global markets. It calls for the assessment of both the risk and opportunity side of transition and physical climate change impacts and creates a reporting framework that allows institutions to prepare themselves for upcoming regulations.

Changing landscape of mainstream corporate reports

The Task Force recommendations outline four thematic areas of disclosure related to climate change that is; governance, strategy, risk management, metrics and targets.

Financial organizations, ranging from banks, insurance companies, to asset managers and asset owners, and companies with public debt or equity, can disclose their financial risks and opportunities associated with climate change transparently and consistently using the Task Force recommendations.

Better access to data will enhance how climate-related risks are assessed, priced, and managed. Companies can more effectively measure and evaluate their risks and opportunities within physical boundaries and value chain. Investors will be able to make informed decisions on where and how they want to allocate their capital. Lenders, insurers and underwriters will be better able to evaluate their risks and exposures over the short, medium, and long-term.

JointValues Framework for Evaluation of ESG and Climate Change

Many companies in Asia-Pacific have already started disclosing their ESG performance and impacts using different standards and frameworks including TCFD. Decision making for investment also needs next level information that how climate change and ESG aspects are influencing the market and business ecosystem including regulations in Asia-Pacific that would impact the financials of a company in short, medium and the long term.

JointValues framework for evaluation of ESG and Climate Change related disclosures by the companies is aligned with TCFD and calibrated for the business ecosystem and regulations in Asia-Pacific. JointValues evaluates index companies for their ESG and climate change disclosures and provides information in the public domain and classified reports to investors for empowering better investment decisions.

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About the Author:

Vedanshi Singh

Analyst (Climate Change Disclosures) & Media Outreach

Vedanshi is a budding professional with a study in health effects of climate-change from Harvard University and self-gained experience of start-up ecosystems in India. An experienced hand in analysis and assessment of public disclosures by the companies on climate change-related financial impacts in line with TCFD Framework.