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Mark Carney, Paul Fisher, and TCFD members on climate risk & opportunities

written by Joel Kenrick

In the FT, Mark Carney, Bank of England Governor and FSB Chair writes that:

"Financial markets have the potential to improve our prospects for tackling climate change, but only if we make climate risks and opportunities more transparent. ... Along with analysis of wider market conditions, investors need accurate data. The more incomplete or opaque the data and analysis, the more inefficient are markets. Yet the climate-related risks and opportunities businesses face are currently shrouded in secrecy. Having information on such risks would allow investors to back their convictions with their capital, whether they are climate optimists or pessimists, evangelicals or sceptics. It would also permit corporates not only to meet investor demand for information, but also to position their businesses to win, rather than be left behind in, the transition to a low-carbon economy." (Better market information can help combat climate change, 28 June, FT ($))

Paul Fisher, former deputy head of the UK’s Prudential Regulatory Authority, warns in IPE.com that:

"Tail risks have an unfortunate habit of becoming reality. ... New risks are emerging around climate change that… pose threats to the financial system not unlike those we faced in 2008. A major flooding event or series of hurricanes could overwhelm the ability of insurance markets to absorb the resulting losses. Growing evidence of rising sea levels or widespread droughts could force policymakers and regulators into drastic action. Financial markets could suddenly re-price the risk posed by affected companies – such as the fossil fuel sector – leading to rapid collapses in the value of entire industrial sectors. In all of these scenarios, banks, insurance companies, and large institutional investors could find themselves facing existence-threatening losses. If ‘systemically important’ institutions face insolvency, we’d have another financial crisis on our hands." (Comment: Could climate cause the next financial crisis?, 29 June, Investment & Pensions Europe). A twitter video drawing on the article has so far received over 300 retweets & likes.

On CNBC, Scott Stringer, the Comptroller of New York City writes:

"With the release of the recommendations and the G20 meeting approaching, there's a chance for scenario analysis and climate change disclosure to take a leap toward becoming a market standard. That means more corporate and investor voices are needed. … This isn't disclosure for disclosure's sake. It's about protecting our investments — and our planet — for generations to come.” (The market-based approach to climate risk, 28 June, CNBC)

Graeme Pitkethly, Unilever CFO, writes on CNN:

"Climate change is affecting companies through the direct impact of steadily rising global temperatures and the policies that governments around the world adopt in response. If markets are to operate efficiently, we must be transparent about that to help investors evaluate companies and make better decisions for the long term." (Companies must come clean on climate risks, 29 June, CNN Money)

Other TCFD commentary:

  • Moody's: Report can enable climate integration into credit analysis, Moody's say in a statement

    that widespread adoption of the recommendations will 'enhance the ability to integrate the impact of climate-related issues into credit analysis'. "Over time, greater standardization of reporting and disclosure practices would allow for a more consistent and material assessment of the credit impact of climate-related risks and opportunities across sectors and issuers," says Richard Cantor, Moody's Chief Risk Officer and member of the FSB Task Force.

  • PwC blog from Jon Williams says "Perhaps the most innovative aspect is the proposal that companies consider how their businesses will fare under different climate scenarios, including the 2oC outcome that the Paris Agreement seeks to meet."
  • PRI Perspectives, Sagarika Chatterjee writes that investors must drive implementation of the FSB Task Force final report.
  • Climate Disclosure Standards Board (CDSB) special newsletter "rounds up key information on the TCFD recommendations and how companies can begin implementation." 
  • 2 degrees investing initiative in partnership with The CO-Firm are launching a Transition Risk Scenario Tool and associated report that directly responds to the TCFD recommendations. The tool allows users to ‘select’ their scenario covering 8 of the most energy-intensive sectors and over 30 risk-related parameters, at global level and across a set of key countries" for a ~2°C and ~3-4°C outcome. 
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