Meeting the evolving definition of fiduciary duty and mitigating legal risk associated with climate change, whilst also building credibility and reputation, requires a strategic climate response.
A strong climate strategy includes the governance structure, risk management and metrics and targets for lowering climate-related risks and identifying and capitalising on climate-related opportunities to ensure long term value creation and improved financial returns through a worsening climate.
Reducing a Financial Institution’s (FIs) contributions toward climate change is also an essential component of a strong climate strategy and must be underpinned by GHG data. FIs must respond at the firm and investment portfolio level, putting in place measures to ensure they have ‘robust’ decarbonisation strategies, to keep global warming within 1.5 C.
Climate change is now a mainstream issue and subject to increasingly stringent investor and regulatory and quasi-regulatory requirements.
|Physical Risk||Transition Risk|
|Hazard||Increased severity and frequency of flooding at the supply chain choke point||Carbon tax increases cost of energy and changes relative value of renewable energy|
|Impact||Financial Costs of supply chain disruption, less resiliency and business continuity||Direct energy cost increase reduces margins and increases ROI for renewables|
|Response||Diversify supply chain and distribution, incentives for climate readiness for suppliers||Revaluate investments in energy efficiency and renewables for optimum ROI|
The Business Response to Climate Change
Increasingly, investors must also publicly disclose that information, following formal frameworks such as the Task Force on Climate-related Disclosures (TCFD). As such, organisations must now define clear climate change strategies for their TCFD disclosure. For investors, this must include an approach to identifying both current and potential investments that are at risk of material impact to value or potentially ultimately becoming stranded assets. It also includes continued identification of the climate change risks that their operations will face, such as extreme weather or sea level rise, and their proactive and effective mitigation.
Many FI’s are also stepping up to make Net Zero commitments, that they will decarbonize their investment portfolios by 2050 or sooner. As part of these commitments, they must now establish credible Net Zero Transition Plan, which is likely to include setting interim targets, integrating net zero considerations into core decision-making tools and processes, and proactively and constructively providing feedback and support to motivate decarbonization of holdings.
We also help clients understand and prioritize across the ecosystem of regulatory drivers and voluntary initiatives such as Glasgow Financial Alliance for Net Zero (GFANZ) and Science Based Targets. From this basis we can assist with the development of leading climate change strategies that can align with the most relevant frameworks and standards.
Our Climate Change and Business Strategy services
Anthesis helps clients understand the practical realities of climate change, and how this may require re-shaping investment strategy at firm level, or business strategies at portfolio level.
Prior to helping clients form a climate change strategy, our team helps to analyse risks and opportunities in order the help understand the resilience of a business. A key step in this process is compiling GHG inventories across the investment portfolio, another step is our climate risk services. We provide a clear roadmap of short-, medium-, and long-term actions to take, to improve climate performance, both in terms of the physical implications and the likely future policy responses. The outputs often include adaptation and mitigation strategies, the latter providing a clear stance on GHG reduction and offset strategies.
FIND OUT MORE ABOUT OUR CLIMATE CHANGE RISK ANALYSIS SERVICES
I have worked with Anthesis for many years. They have a depth of ESG understanding and expertise, allowing real analysis and advice on the emerging issues that are becoming increasingly material to our clients. What sets them apart is their willingness and ability to apply this, together with technology solutions, to enhance the quality and speed of their reporting.
Partner, Latham & Watkins
We wanted the ESG screen as we were keen to understand the definition of ESG and to see the criteria you would be using. We were also interested to see how others would view us through this lens. The Anthesis screen provided us a with a “mirror”. The value to Neste was that it confirmed we are on a right track to addressing ESG issues. It also helped us to identify some potential improvement opportunities, several of which we are working on, and others that warrant further evaluation.
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Anthesis has offices in the U.S., Canada, UK, France, the Netherlands, Belgium, South Africa, Ireland, Italy, Germany, Sweden, Spain, Portugal, Andorra, Finland, Colombia, Brazil, China, the Philippines and the Middle East.