This document provides an introductory guide for directors on climate risk governance. It begins with an overview of key climate change concepts, including the physical and economic risks posed by climate change and how it impacts most industries. It then discusses how directors can start their board's climate change journey by understanding their duties, assessing risks and opportunities, and examining governance structures and stakeholder expectations. The guide provides questions for boards to consider around climate governance, strategy, and risk oversight. It also reviews litigation risks and regulatory expectations for companies to address climate change.
Our report finds that investors, asset managers and banks urgently need a way to identify and measure how companies are responding to the risks of climate change.
Even though many asset owners have made commitments to responsible investment, the majority have yet to ensure that these are effectively implemented. There are inconsistencies in investment practices in different asset classes, high-level statements on sustainability or environmental, social and governance issues are often missing from investment beliefs, and responsible investment commitments are not embedded in investment mandates.
This creates a multiplier effect throughout the investment market. Weak implementation of responsible investment by individual asset owners sends signals to the investment market as a whole that responsible investment is not a priority for asset owners. In turn, this limits the willingness of investment consultants and investment managers to focus on responsible investment and ESG issues in their products and in their advice.
By implementing their commitments to responsible investment with sufficient scale and depth, asset owners can accelerate the development of responsible investment through the investment chain.
European Risk Management Seminar 2018 - Sustainability ReportFERMA
FERMA’s aim in focussing on sustainability in our 2018 European Risk Management Seminar and in publishing this report is to strengthen the risk manager in ensuring the sustainability of our organisations and ultimately our societies.
Financial institutions play a critical role in our economy. They are the front line in managing all financial risks, including those posed by climate change. The stability of our economy and financial system as a whole will depend on how quickly and deeply financial institutions adapt to the risks faced by the Australian economy from climate change.
Our report finds that investors, asset managers and banks urgently need a way to identify and measure how companies are responding to the risks of climate change.
Even though many asset owners have made commitments to responsible investment, the majority have yet to ensure that these are effectively implemented. There are inconsistencies in investment practices in different asset classes, high-level statements on sustainability or environmental, social and governance issues are often missing from investment beliefs, and responsible investment commitments are not embedded in investment mandates.
This creates a multiplier effect throughout the investment market. Weak implementation of responsible investment by individual asset owners sends signals to the investment market as a whole that responsible investment is not a priority for asset owners. In turn, this limits the willingness of investment consultants and investment managers to focus on responsible investment and ESG issues in their products and in their advice.
By implementing their commitments to responsible investment with sufficient scale and depth, asset owners can accelerate the development of responsible investment through the investment chain.
European Risk Management Seminar 2018 - Sustainability ReportFERMA
FERMA’s aim in focussing on sustainability in our 2018 European Risk Management Seminar and in publishing this report is to strengthen the risk manager in ensuring the sustainability of our organisations and ultimately our societies.
Financial institutions play a critical role in our economy. They are the front line in managing all financial risks, including those posed by climate change. The stability of our economy and financial system as a whole will depend on how quickly and deeply financial institutions adapt to the risks faced by the Australian economy from climate change.
People, Planet & Performance: sustainability guide for risk and insurance man...FERMA
On 31 March, FERMA releases the first guide specifically for European risk managers on sustainability risks.
People, planet, performance – The contribution of Enterprise Risk Management to Sustainability provides practical guidance on incorporating sustainability goals into enterprise-wide risk management.
Sustainability has always been at the heart of the role of the risk manager, so that their organisations are resilient to shocks and can continue to fulfil their objectives. In the 21st century, that vision has widened, because companies are increasingly asked to be good corporate citizens and to play a part in our overall adaptation to climate change.
A combined solution to compliance and risk management for sustainability repo...Ardea International
The UK has introduced new regulations for business on how to report. Integration of risk and strategy is key. Diagnostics to help define material social and environmental risk will save costs. Compliance with legal obligations will also be key.
Australia will face significant human and economic costs because its infrastructure is poorly equipped to handle more frequent extreme weather events and other consequences of climate change.
A new report by The Climate Institute, Coming Ready or Not: Managing climate risks to Australia’s infrastructure, gathers research on the physical impacts and consequences of climate change on major infrastructure across the property, electricity, road and rail and finance sectors. It examines the preparedness of businesses and governments to manage these risks and the steps needed to improve Australia’s climate readiness.
Preparing for cyber insurance - FERMA - Insurance Europe - BIPARFERMA
The guide “Preparing for cyber insurance” outlines how organisations with an interest in accessing cyber insurance can best prepare for discussions with insurance intermediaries and insurers. It also provides tools to help organisations evaluate cyber insurance offers and how they may translate in practice.
The slides are lecture slides when I guess lecturing in the Post Graduate Program in Department of Accounting, La Trobe University, Australia. The majority of students attended this lecture are enrolled in Master of Professional Accounting and Master of Finance program. Among them there were also students from Master of Islamic Banking and Finance. This lecture was intended to enlighten students on the importance of Sustainable Development or Sustainability paradigm in accounting. Furthermore, the objective was to encourage students to be involved in Sustainability practice.
International commitments in response to the need to avoid climate change are now clear, and these commitments imply significant and potentially rapid changes in emissions, including in Australia. This will have implications for many sectors.
The science of probabilistic impacts of climate change are advancing rapidly and allows directors and their advisors to obtain a far more granular view of likely exposure than has ever been possible before.
This technological development in itself poses a risk and an opportunity to directors, who can either exploit or ignore new sources of data. Competitors and other external parties such as investors and researchers may be able to access a far more granular risk data on a third party’s physical assets.
There is now a substantial and rapidly growing body of research and expertise on the material financial implications of climate change – through direct impacts, transition measures, and related pathways including legal liability risk and technological disruption.
Financial actors and authorities are now voicing an expectation for increasingly clear disclosure of climate risks. This has accelerated rapidly in the past 12 to 18 months and is continuing to evolve today, both in Australia and among international markets.
AUSTRALIA’S NEW HORIZON: CLIMATE CHANGE CHALLENGES AND PRUDENTIAL RISK (Feb...Turlough Guerin GAICD FGIA
My focus today will be climate change and climate risk. Following my remarks here last year, I fielded a question from the floor on climate change and associated prudential risks, and noted some of the implications for financial sector entities. The questions moved on, but I have continued to reflect on these issues with my colleagues over the past 12 months.
At the same time, developments in Australia and abroad placed climate-related financial risks firmly in sight. Bank of England Governor, Mark Carney, said last year that the entry into force of the Paris Climate Agreement ‘brings the horizon forward’ for action on climate change. It heightens transition risks and opportunities, makes them more immediate, and ‘puts a premium on the ability of private markets to adjust’. 1Australia’s ratification of the Paris Agreement last November ensures we have a new horizon too.
Today I want to reflect on these and other developments. I want to offer some observations about why climate-related risks are likely to be relevant and important, not only for insurers but for all APRA-regulated entities. I will also talk about how we see ‘climate risks’ as part of our broader approach to prudential risk management and supervision.
To begin with a generalisation, while climate risks have been broadly recognised, they have often been seen as a future problem or a non-financial problem.
The key point I want to make today, and that APRA wants to be explicit about, is that this is no longer the case. Some climate risks are distinctly ‘financial’ in nature. Many of these risks are foreseeable, material and actionable now. Climate risks also have potential systemwide implications that APRA and other regulators here and abroad are paying much closer attention to.
People, Planet & Performance: sustainability guide for risk and insurance man...FERMA
On 31 March, FERMA releases the first guide specifically for European risk managers on sustainability risks.
People, planet, performance – The contribution of Enterprise Risk Management to Sustainability provides practical guidance on incorporating sustainability goals into enterprise-wide risk management.
Sustainability has always been at the heart of the role of the risk manager, so that their organisations are resilient to shocks and can continue to fulfil their objectives. In the 21st century, that vision has widened, because companies are increasingly asked to be good corporate citizens and to play a part in our overall adaptation to climate change.
A combined solution to compliance and risk management for sustainability repo...Ardea International
The UK has introduced new regulations for business on how to report. Integration of risk and strategy is key. Diagnostics to help define material social and environmental risk will save costs. Compliance with legal obligations will also be key.
Australia will face significant human and economic costs because its infrastructure is poorly equipped to handle more frequent extreme weather events and other consequences of climate change.
A new report by The Climate Institute, Coming Ready or Not: Managing climate risks to Australia’s infrastructure, gathers research on the physical impacts and consequences of climate change on major infrastructure across the property, electricity, road and rail and finance sectors. It examines the preparedness of businesses and governments to manage these risks and the steps needed to improve Australia’s climate readiness.
Preparing for cyber insurance - FERMA - Insurance Europe - BIPARFERMA
The guide “Preparing for cyber insurance” outlines how organisations with an interest in accessing cyber insurance can best prepare for discussions with insurance intermediaries and insurers. It also provides tools to help organisations evaluate cyber insurance offers and how they may translate in practice.
The slides are lecture slides when I guess lecturing in the Post Graduate Program in Department of Accounting, La Trobe University, Australia. The majority of students attended this lecture are enrolled in Master of Professional Accounting and Master of Finance program. Among them there were also students from Master of Islamic Banking and Finance. This lecture was intended to enlighten students on the importance of Sustainable Development or Sustainability paradigm in accounting. Furthermore, the objective was to encourage students to be involved in Sustainability practice.
International commitments in response to the need to avoid climate change are now clear, and these commitments imply significant and potentially rapid changes in emissions, including in Australia. This will have implications for many sectors.
The science of probabilistic impacts of climate change are advancing rapidly and allows directors and their advisors to obtain a far more granular view of likely exposure than has ever been possible before.
This technological development in itself poses a risk and an opportunity to directors, who can either exploit or ignore new sources of data. Competitors and other external parties such as investors and researchers may be able to access a far more granular risk data on a third party’s physical assets.
There is now a substantial and rapidly growing body of research and expertise on the material financial implications of climate change – through direct impacts, transition measures, and related pathways including legal liability risk and technological disruption.
Financial actors and authorities are now voicing an expectation for increasingly clear disclosure of climate risks. This has accelerated rapidly in the past 12 to 18 months and is continuing to evolve today, both in Australia and among international markets.
AUSTRALIA’S NEW HORIZON: CLIMATE CHANGE CHALLENGES AND PRUDENTIAL RISK (Feb...Turlough Guerin GAICD FGIA
My focus today will be climate change and climate risk. Following my remarks here last year, I fielded a question from the floor on climate change and associated prudential risks, and noted some of the implications for financial sector entities. The questions moved on, but I have continued to reflect on these issues with my colleagues over the past 12 months.
At the same time, developments in Australia and abroad placed climate-related financial risks firmly in sight. Bank of England Governor, Mark Carney, said last year that the entry into force of the Paris Climate Agreement ‘brings the horizon forward’ for action on climate change. It heightens transition risks and opportunities, makes them more immediate, and ‘puts a premium on the ability of private markets to adjust’. 1Australia’s ratification of the Paris Agreement last November ensures we have a new horizon too.
Today I want to reflect on these and other developments. I want to offer some observations about why climate-related risks are likely to be relevant and important, not only for insurers but for all APRA-regulated entities. I will also talk about how we see ‘climate risks’ as part of our broader approach to prudential risk management and supervision.
To begin with a generalisation, while climate risks have been broadly recognised, they have often been seen as a future problem or a non-financial problem.
The key point I want to make today, and that APRA wants to be explicit about, is that this is no longer the case. Some climate risks are distinctly ‘financial’ in nature. Many of these risks are foreseeable, material and actionable now. Climate risks also have potential systemwide implications that APRA and other regulators here and abroad are paying much closer attention to.
The effects of our changing climate pose one of the biggest areas of uncertainty that we face, whether as
individuals, organisations or societies. With this in mind, the Institute of Risk Management (IRM) Climate
Change Special Interest Group (SIG) was formed in late 2019 with the main objectives of producing thought
leadership, organising events and building engagement with the broader IRM membership, SIG members
and other stakeholders.
One of the group’s first projects was to develop this practitioner’s guide to help risk managers and boards
integrate climate change risk management into an organisation’s existing Enterprise Risk Management
(ERM) framework. The SIG established a working group to review existing best practices from leading
practitioners, latest research and literature and incorporate personal experiences on the subject, all of which
have been compiled into this guide. This includes identifying and reporting climate change risks to boards
and supporting strategic decision making. This is both a major challenge and a big opportunity for risk
managers. The integration of emerging risk information and analysis will provide several benefits, including
an improved risk appetite framework and risk mitigation strategies across most areas of an organisation’s
risk profile. The focus has also been to support risk managers and SIG members across all sectors, not just
financial services.
https://www.theirmindia.org/
Guide for Responsible Corporate Engagement in Climate PolicySustainable Brands
This report from the UN Global Compact outlines the practical actions a company can take to become a responsible voice in the climate policy debates. Presently, there are political obstacles in many countries standing in the way of meaningful climate policy action. However, as the need for action on climate change becomes more urgent, there is an increasing need for business and government to work together on ambitious climate solutions.
Driving Transformative Change: The Role of the Private SectorSustainable Brands
The risks and opportunities involved in addressing climate change are becoming better understood in cabinet and board meetings around the world. Businesses will need to consider whether they want to be disrupted and left behind, or be the disruptors who take proactive actions to grow into the change and benefit from new opportunities. Investors will increasingly seek out those companies that are taking the latter approach.
Climate risk disclosure: What are the financial and asset impacts of physical...Briony Turner
This presentation was given as part of Futurebuild 2020 | 4 March | Session: How do we achieve '100% net zero carbon'? You will need to download it to use the hyperlinks.
Find out more about the recommendations arising from my PhD in this LinkedIn post: Stepping out -recommendations for mainstreaming climate change adaptation of England's social housing stock: https://www.linkedin.com/pulse/stepping-out-recommendations-mainstreaming-climate-change-turner/
Adaptation to Climate Change An Initial View lr - Aug 2013Tim Jones
This presentation summarises a research project undertaken in Q2 of 2013 looking at how different organisations are planning for adaptation to climate change. Based on discussions with leaders from over 20 companies around the world and supported by additional analysis, it looks at a number of issues in and around adaptation.
Key areas covered are:
Foresight and Future Agenda
The Context For Adaptation
Adaptation Policy and Plans
Business Risk
Variations by Geography
Impact of Cities
Levels of Adaptation Activity
Implications and Trade Offs
This is designed as an initial view of where thinking is currently at, what are some of the key shifts taking place and what are some of the major challenges. It is not meant to be the answer but more to layout the challenge and identify some of the key questions and trade offs we need to consider both globally and locally as we learn to live with effects of global warming and a 4C warmer world.
Further discussions on and around this topic will take place later this year as part of our ongoing refresh of emerging views in and around the impacts and implications of climate change.
The Future Agenda programme is the world’s first global open foresight initiative. Supported in 2010 by Vodafone Group, this is a major cross-discipline project that united some of the best minds from around the globe to address the greatest challenges of the next decade. In doing so, it mapped out the major issues, identified and discussed potential solutions, suggested the best ways forward and provided a unique open platform for collective innovation at a higher level than has been previously been achieved. The first programme involved over 2500 experts in 50 workshops around the world and engaged on-line with another 20,000 people in 147 different countries. Many companies, governments and other organsiations around the world are using insights from the Future Agenda to identify major growth platforms for the future. A second programme looking at the world in 2025 is scheduled for 2015.
Since the first programme, we have been undertaking a number of deep dives into specific areas of interest to companies. These have ranges from the emerging role of women in India, the increasing influence of cities and the future of work through to specific implications of emerging changes on sectors including banking, FMCG, transportation and healthcare. The Adaptation to Climate Change is the latest of these deep dives.
Fresh food safety has not received widespread governance attention, partly because consumers
expect high levels of service continuity.
While largely voluntary currently, black letter law is on its way as signaled by the corporate regulators.
Climate-related risks are accelerating the need for renewed governance focus.
The competition for fresh food continues to put downward pressure on the sector’s supply
chain. Directors across this very broad supply chain need to ask the right questions, at the
right time, and ensure adequate and appropriate resources are allocated to address the
risks. This will help ensure that organisations in the value chain prepare for the inevitable
climate-related impacts that will challenge our fresh food supply, protecting consumers,
their brands, and reputations. Danone and Fonterra are cited as leaders in this area.
Why climate risks and food safety?
The physical risks only tell part of the story of the challenge that climate change poses to the value chain
for fresh food. For example, increased incidences of mycotoxins and higher risks of cold chain
discontinuity and failures. What we know about climate-related risks in Australia is that there will be more
extreme weather events (for example, cyclones, floods, droughts) and a range of knock-on effects
Australian Bushfire
and Climate Plan
Final report of the National Bushfire and Climate Summit 2020
The severity and scale of Australian bushfires
is escalating
Australia’s Black Summer fires over 2019 and 2020
were unprecedented in scale and levels of destruction.
Fuelled by climate change, the hottest and driest year
ever recorded resulted in fires that burned through land
two-and-a-half times the size of Tasmania (more than 17
million hectares), killed more than a billion animals, and
affected nearly 80 percent of Australians. This included
the tragic loss of over 450 lives from the fires and
smoke, more than 3,000 homes were destroyed, and
thousands of other buildings.
While unprecedented, this tragedy was not
unforeseen, nor unexpected. For decades climate
scientists have warned of an increase in climaterelated disasters, including longer and more
dangerous bushfire seasons, which have become
directly observable over the last 20 years. Extremely
hot, dry conditions, underpinned by years of reduced
rainfall and a severe drought, set the scene for the
Black Summer crisis.
Recommendations - The 3 Rs - Response,
Readiness and Recovery
There is no doubt that bushfires in Australia have
become more frequent, ferocious and unpredictable
with major losses in 2001/02 in NSW, 2003 in the
ACT, 2013 in Tasmania and NSW, 2018 in Queensland,
2009 Black Saturday Fires in Victoria and 2019/20 in
Queensland, NSW, Victoria and South Australia. We are
now in a new era of supercharged bushfire risk, forcing
a fundamental rethink of how we prevent, prepare for,
respond to, and recover from bushfires.
This Australian Bushfire and Climate Plan report
provides a broad plan and practical ideas for
governments, fire and land management agencies
and communities to help us mitigate and adapt to
worsening fire conditions. The 165 recommendations
include many measures that can be implemented right
now, to ensure communities are better protected.
How to work with petroleum hydrocarbon suppliers to reduce and eliminate cont...Turlough Guerin GAICD FGIA
Petroleum hydrocarbon suppliers affect a mine's goals for environmental performance because of the extensive reach of petroleum hydrocarbon products into the mining and minerals product life cycle, their impact on operational efficiencies, cost, and mine viability, and their potential for leaving negative environmental as well as safety legacies. The supplied petroleum hydrocarbon life cycle is a framework that enables structured engagement between supplier and customer on a range of environmental performance issues because it is an example of input into the mining industry that affects the entire mining and minerals processing an value chain. Engagement with suppliers in a proactive manner can be a risk management strategy. Questions for businesses to ask in relation to suppliers and their role in minimizing business risks and creating new value are offered (https://onlinelibrary.wiley.com/doi/full/10.1002/rem.21669).
Governments would get bigger bang for taxpayer
buck by instead spending more on upgrading existing infrastructure,
and on social infrastructure such as aged care and mental health care.
Choosing net zero is
an economic necessity
Australia pays a high price of a global failure
to deliver new growth in recovery. Compared
to this dismal future, Deloitte Access Economics
estimates a new growth recovery could
grow Australia’s economy by $680 billion
(present value terms) and increase GDP
by 2.6% in 2070 – adding over 250,000 jobs
to the Australian economy by 2070.
The world of venture capital has seen huge changes over the past decade. Ten years ago there were fewer than
20 known unicorns in the US5
; there are now over 2006
. Annual investment of global venture capital has increased
more than fivefold over the same period, rising to $264 billion by 2019. This investment has been dominated by the
tech sector harnessing digital frontiers to disrupt traditional industries – including cloud computing, mobile apps,
marketplaces, data platforms, machine learning and deep tech.7
It is an ecosystem that acts as the birthplace for
innovation and brands that can shape the future of consumerism, sectors and markets.
As COVID-19 has taken hold of the
world, the question of whether venture
capital, and early stage investing more
broadly, is backing and scaling the
innovations our world really needs has
never been more pertinent. Life science
and biotech investing is an asset class
perhaps most resilient and relevant to
the short-term impact of COVID-19,
but there is another impact-critical
investment area that is emerging as
an increasingly important investment
frontier: climate tech.
This research represents a first-ofits-kind analysis of the state of global
climate tech investing. We define what
it is and show how this new frontier
of venture investing is becoming a
standout investing opportunity for the
2020s. Representing 6% of global
annual venture capital funding in 2019,
our analysis finds this segment has
grown over 3750% in absolute terms
since 2013. This is on the order of 3
times the growth rate of VC investment
into AI, during a time period renowned
for its uptick in AI investment.8
Looking forward can climate tech in the
2020s follow a similar journey to the
artificial intelligence (AI) investing boom
in the 2010s? The substantial rates of
growth seen in climate tech in the late
2010s, and the overarching need for
new transformational solutions across
multiple sectors of the economy,
suggests yes. The stage appears set
for an explosion of climate tech into the
mainstream investment and corporate
landscape in the decade ahead.
Nine shifts will radically change the way construction projects are delivered—and similar
industries have already undergone many of the shifts. A combination of sustainability
requirements, cost pressure, skills scarcity, new materials, industrial approaches, digitalization,
and a new breed of player looks set to transform the value chain. The shifts ahead include
productization and specialization, increased value-chain control, and greater customercentricity
and branding. Consolidation and internationalization will create the scale needed to
allow higher levels of investment in digitalization, R&D and equipment, and sustainability as well
as human capital.
Sustainable Finance Industry Guide
This industry guide provides information about sustainable finance in the built environment in Australia. It is designed to support investor understanding of Australia’s world-class rating tools and standards, and how these can be applied to direct more capital towards sustainable finance for our built environment. Included are insights that reflect lessons learnt when using a rating scheme to establish an investment framework, conduct
due diligence or report on an issuance.
Precincts to Support the Delivery of Zero Energy
This report frames the physical and organisational context for precinct action and identifies potential programs and government solutions that may be applied to better streamline the realisation of precinct-scale action to progress towards zero energy (and carbon) ready residential buildings within both new and existing precincts.
The report was developed based on a literature review and engagement with more than 80 stakeholders from industry, academia and government with the aim of identifying appropriate government action in the form of proposed solutions that may be applicable across Commonwealth, state and territory and/ or local governments.
The report has given focus to opportunities for precincts that are not already considered in the Trajectory to ensure that a wider system response is taken to considering the zero energy (and carbon) ready outcomes being sought.
When seeking funding, environmental and sustainability professionals must clarify how their role and the proposed project fit within the business' strategy.
This article provides a checklist for those seeking funding for sustainability and environmental projects.
The suggested questions will assist non-executive directors in evaluating sustainability-focused proposals.
Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
As a business owner in Delaware, staying on top of your tax obligations is paramount, especially with the annual deadline for Delaware Franchise Tax looming on March 1. One such obligation is the annual Delaware Franchise Tax, which serves as a crucial requirement for maintaining your company’s legal standing within the state. While the prospect of handling tax matters may seem daunting, rest assured that the process can be straightforward with the right guidance. In this comprehensive guide, we’ll walk you through the steps of filing your Delaware Franchise Tax and provide insights to help you navigate the process effectively.
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
"𝑩𝑬𝑮𝑼𝑵 𝑾𝑰𝑻𝑯 𝑻𝑱 𝑰𝑺 𝑯𝑨𝑳𝑭 𝑫𝑶𝑵𝑬"
𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
𝐓𝐉 𝐂𝐨𝐦𝐬 provides unlimited package services including such as Event organizing, Event planning, Event production, Manpower, PR marketing, Design 2D/3D, VIP protocols, Interpreter agency, etc.
Sports events - Golf competitions/billiards competitions/company sports events: dynamic and challenging
⭐ 𝐅𝐞𝐚𝐭𝐮𝐫𝐞𝐝 𝐩𝐫𝐨𝐣𝐞𝐜𝐭𝐬:
➢ 2024 BAEKHYUN [Lonsdaleite] IN HO CHI MINH
➢ SUPER JUNIOR-L.S.S. THE SHOW : Th3ee Guys in HO CHI MINH
➢FreenBecky 1st Fan Meeting in Vietnam
➢CHILDREN ART EXHIBITION 2024: BEYOND BARRIERS
➢ WOW K-Music Festival 2023
➢ Winner [CROSS] Tour in HCM
➢ Super Show 9 in HCM with Super Junior
➢ HCMC - Gyeongsangbuk-do Culture and Tourism Festival
➢ Korean Vietnam Partnership - Fair with LG
➢ Korean President visits Samsung Electronics R&D Center
➢ Vietnam Food Expo with Lotte Wellfood
"𝐄𝐯𝐞𝐫𝐲 𝐞𝐯𝐞𝐧𝐭 𝐢𝐬 𝐚 𝐬𝐭𝐨𝐫𝐲, 𝐚 𝐬𝐩𝐞𝐜𝐢𝐚𝐥 𝐣𝐨𝐮𝐫𝐧𝐞𝐲. 𝐖𝐞 𝐚𝐥𝐰𝐚𝐲𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞 𝐭𝐡𝐚𝐭 𝐬𝐡𝐨𝐫𝐭𝐥𝐲 𝐲𝐨𝐮 𝐰𝐢𝐥𝐥 𝐛𝐞 𝐚 𝐩𝐚𝐫𝐭 𝐨𝐟 𝐨𝐮𝐫 𝐬𝐭𝐨𝐫𝐢𝐞𝐬."
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
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1. Discover more at aicd.com.au/cgia
Climate risk
governance guide
An introductory resource for directors
on climate risk governance
2. CLIMATE RISK GOVERNANCE GUIDE
aicd.com.au/cgia 2
Table of contents
Purpose and scope of this guide 3
Part 1: What do I need to know
about climate change? 5
What is climate change? 5
Why is climate change an issue for
organisations and boards? 6
Which industries are impacted
by climate change? 8
Climate change key concepts 8
Part 2: How do I start my
board’s climate change journey? 9
Where are we now? 10
Governance — embedding sound
foundations, processes and structures 11
The board in action — strategic
planning and risk oversight 11
Reporting12
Reflecting on your progress — next steps 12
Part 3: What are the duties and
expectations of me as a director? 13
Directors’ duties 13
Climate change and the best
interests of the company 14
Duty of due care and diligence and
taking a proactive approach to
climate governance 14
Climate change and
misleading disclosure 15
Heightened regulatory and
stakeholder expectations 15
Litigation risks 17
Appendix 1: Glossary of key climate terms
and leading frameworks 18
Key climate terms 18
Governance, management disclosure
— current leading frameworks 20
Appendix 2: World Economic
Forum principles 23
Appendix 3: How the Board
Readiness Check works 24
Appendix 4: Resource library 28
3. CLIMATE RISK GOVERNANCE GUIDE
aicd.com.au/cgia 3
This guide is an introductory resource for directors
on climate change risk governance.
It provides a plain-language introduction to
fundamental climate change concepts, and
considers this issue in the context of the non-
executive directors’ role and duties. This guide is
general – it does not go into detail nor comment
on specific duties that may apply in any
given circumstance.
This guide considers the following questions from
the perspective of a non-executive director:
Part 1: What do I need to know about
climate change?
• Introduction to key climate change
concepts and risks to develop your
understanding.
Part 2: How do I start my board’s climate
change journey?
• Key questions to ask yourself and your
board about how to get climate change
onto your agenda, establish good
governance structures, consider strategy
and risk, and report and disclose.
Part 3: What are the duties and
expectations of me as a director?
• How your duties as a director might
interact with climate change risk and
opportunity, and the legal and strategic
issues you and your organisation may
need to consider.
Directors starting on their climate change journey
might want to think about some of the questions
posed in the practical guidance in Part 2 and then
use Parts 1 and 3 to build their understanding of
this issue.
Climate Governance Initiative Australia
The AICD is the host of the Climate Governance
Initiative Australia which assists in supporting
our members in meeting the challenges and
opportunities of governing climate change risk.
As host of the Australian Chapter of the Climate
Governance Initiative, our members have
access to a global network of experts in risk
and resilience and to non-executive directors
who are leading their organisations’ governance
response to climate change.
The Climate Governance Initiative (CGI) is an
active and rapidly expanding network of over
20 bodies globally, whose Chapters promote the
World Economic Forum Climate Governance
Principles for boards and effective climate
governance within their jurisdictions. The
principles are set out in Appendix 2 of this guide.
The principles support directors to gain
awareness, embed climate considerations into
board decision making, and understand and act
upon the risks and opportunities that climate
change poses to their organisations.
CGI chapters have already been established
in many comparable countries, including the
UK, US (hosted by the National Association of
Corporate Directors), Canada (hosted by the
Institute of Corporate Directors) and France.
Purpose and scope
of this guide
4. aicd.com.au/cgia 4
CLIMATE RISK GOVERNANCE GUIDE
GET CLIMATE CHANGE
ON THE AGENDA
This will enable the board to discuss climate-related
risks or opportunities which are not being addressed in
order to have a deeper conversation
READ
Part 1: What is climate change?
Appendix 1: Glossary of key climate terms and
leading frameworks
CONSIDER
Part 2: Where are we now?
Appendix 3: The Board Readiness Check tool
ASSESS OPPORTUNITY
To ensure your organisation is in a position to benefit
from the opportunities that climate change presents
(e.g. transition to a low-carbon economy)
READ
Part 3: Directors’ duties
CONSIDER
Part 2: The board in action - strategic planning and
risk oversight
ASSESS RISK
To ensure your organisation is prepared for the impact
of climate change on your organisation
READ
Part 1: Why is climate change an issue for
organsiations and boards?
Part 3: Directors’ duties
CONSIDER
Part 2: The board in action - strategic planning and
risk oversight
EXAMINE GOVERNANCE STRUCTURES,
STAKEHOLDERS AND REPORTING
To ensure your organisation is prepared to address
the issue and understand stakeholder sentiment and
reporting expectations
READ
Part 3: Heightened regulatory and stakeholder
expectations
Part 3: Climate change and misleading disclosure
CONSIDER
Part 2: Governance - embedding sound
foundations, processes and structures
Part 2: Reporting
How do I use this guide to start
my board’s climate journey?
TAKE ACTION
Once your board has taken these steps, take action and focus on continuous improvement
How? Agree an action plan, convey to management, implement, monitor and review
Monitor AICD for updates and more guides and assistance
5. CLIMATE RISK GOVERNANCE GUIDE
aicd.com.au/cgia 5
PART 1:
What do I need to know
about climate change?
WHAT IS CLIMATE CHANGE?
Climate change is a phenomenon that occurs
from the accumulation of greenhouse gases
(including carbon dioxide, nitrous oxide and
methane) in the atmosphere.
Scientists have been in broad consensus about
the human contribution to climate change, for a
number of decades. Human industrial activity has
resulted in volumes of greenhouse gas emissions
significantly higher than the natural baseline. These
activities include (for example) the combustion of
hydrocarbon-based fossil fuels (such as coal, oil and
gas) for both stationary energy and transport, the
release of methane from livestock and nitrogen in
agricultural fertilisers, and the clearing of nature’s
gas ‘sinks’ (such as forests and peats).
The additional volume of emissions has caused the
layer of greenhouse gas to thicken. As it thickens,
it traps more and more heat within the Earth’s
atmosphere. Global average temperatures now
exceed 1.1°C above those of pre-industrial times,
and more than 1.4°C above pre-industrial averages
over Australia. Scientists have warned that current
emissions trajectories may result in catastrophic
warming in excess of 4°C by the end of this century.
In response, 196 countries have signed the Paris
Agreement, under which governments have
committed to reducing economic emissions to
a level consistent with limiting global warming
to well below 2°C above pre-industrial averages,
and to pursue efforts to limit warming to 1.5°C.
This commitment, in turn, will require the global
economy to transform to a ‘net zero emissions’
norm (that is, one in which the volume of
greenhouse gas emissions produced is balanced
with the volume of emissions taken out of the
atmosphere) before 2050, and to halve its emissions
footprint by 2030.
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PART 1: WHAT DO I NEED TO KNOW ABOUT CLIMATE CHANGE?
1. Refer to the following key physical risk resources: Intergovernmental Panel on Climate Change (IPCC), Climate Change 2021: The Physical Science Basis, Summary for Policy
Makers, August 2021, https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_SPM.pdf. ; Regional fact sheet - Australasia, https://www.ipcc.ch/report/
ar6/wg1/downloads/factsheets/IPCC_AR6_WGI_Regional_Fact_Sheet_Australasia.pdf. ; and Interactive Atlas, https://www.ipcc.ch/report/ar6/wg1/#InteractiveAtlas.
See further Appendix 1 Glossary of key climate terms and leading frameworks and Appendix 4 Resources library.
WHY IS CLIMATE CHANGE AN ISSUE FOR
ORGANISATIONS AND BOARDS?
Climate change has rapidly evolved from one seen as an
ethical and environmental issue to one that presents material
financial risks and opportunities for organisations – across
short, medium and long terms. This evolution has been driven
by developments in the climate science, and a stark shift in
institutional investor, debt finance, regulator, market and
community expectations. Today, many employees also see
their organisation’s environmental impact as an important
factor impacting their choice of employer.
Climate change creates two primary financial risks: the
physical impacts of a changing climate; and risks in the
transition to a net zero emissions economy.
A failure to manage these risks can, in turn, give rise to
significant risks to a company’s reputation and ‘social licence
to operate’ and, ultimately, exposure to litigation risks.
These risks are discussed in turn below:
• Physical risks1
– to the natural and built environment.
These include both acute risks associated with an
increase in the frequency and intensity of extreme
weather events, such as coastal and inland floods,
extreme winds and precipitation, soil contraction,
heatwaves and drought, and gradual onset impacts such
as rising sea levels, increasing average temperatures
and rainfall variation. These, in turn, have significant
consequences for ecosystem loss, human health, the
integrity of the built environment and supply chains.
Consequences for organisations may include:
- Damage to assets and project delays – Increasing
frequency of extreme weather events can heighten
the risk of physical damage and associated costs to
projects, plant and equipment.
- Uninsurability of projects and assets – Climate change
can impact on insurance coverage and uninsured
loss implications, together with additional capital
expenditure requirements.
- Supply chain disruptions –Severe weather events (such
as extreme precipitation leading to inland flooding)
may disrupt operations and/or supply chains, which
can impact revenue.
Physical risks compound over time and become significantly
worse under high emissions scenarios. However, scientists
have made clear that even under ‘low emissions’ scenarios,
where emissions are significantly reduced to a level that
limits warming to 1.5°C above pre-industrial averages, both
physical risks are now (and will continue to be) significantly
elevated versus historical experience.
Figure 1: Australian average annual temperatures – observed and simulated to 2040
Source: Bureau of Meteorology, State of the Climate 2020, http://www.bom.gov.au/state-of-the-climate/future-climate.shtml.
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PART 1: WHAT DO I NEED TO KNOW ABOUT CLIMATE CHANGE?
• Economic transition risks2
– as governments, capital
markets and the real economy shift in pursuit of low-
emissions targets. Transition risks include policy and
regulatory responses (such as emissions reduction laws,
trade laws and tariffs, prudential regulation and heightened
planning and building codes), technological developments
(in areas such as renewable energy and electric vehicles)
and shifts in stakeholder preferences (including of investors,
insurers, customers and the community).
The attention of governments, regulators and investors
has recently shifted to achieving the ‘stretch’ target
under the Paris Agreement, of limiting global warming
to 1.5°C above pre-industrial averages, in an effort to
limit the worst physical impacts associated with climate
change. Achieving that target would require a significant
transformation in the global economy – which in turn
implies the potential for heightened economic transition
risks (and opportunities) over short, medium and long
term time horizons.
Already, governments representing more than 70% of the
global economy have announced policies to transition
their economies to ‘net zero’ by 2050 (including every
Australian State and Territory) – in many cases with
commitments to halve emissions by 2030 as they work
towards the longer-term target. These global emissions
reduction commitments are increasingly being applied
across adjacent areas of regulation – including tariffs
and trade, and capital regulatory requirements.
• Litigation transition risks – arise from a failure to
manage or disclose the physical or economic transition
risks. This includes areas such as directors’ duties,
misleading disclosure (in annual reports, fund raising
documents and contracts), contractual disputes (in
areas from force majeure to pricing pass-throughs) and
nuisance/negligence (where third parties suffer damage
due to a failure of an asset owner to adapt their assets
to foreseeable climate-related risks). Further examples
of these risks are set out in Part 3 of this guide.
In 2021, even despite the global COVID-19 pandemic, the
World Economic Forum’s Global Risks Report identified a
failure of climate change action as the greatest risk to the
global economy, and climate-related issues as five of the
top six greatest risks.3
The risks and opportunities associated with climate
change, and their potential financial impacts, is
summarised by the Taskforce on Climate-related Financial
Disclosures below.
2. Refer top the following key economic transition risk resources: Task force on Climate-related Financial Disclosures, Recommendations of the Task Force on Climate-related
Financial Disclosures, June 2017, https://assets.bbhub.io/company/sites/60/2020/10/FINAL-2017-TCFD-Report-11052018.pdf.; Sustainability Accounting Standards Board,
Climate Risk: Technical Bulletin, April 2021, https://www.sasb.org/knowledge-hub/climate-risk-technical-bulletin/.
See further Appendix 1 Glossary of key climate terms and leading frameworks and Appendix 4 Resource library.
3. World Economic Forum, 2021, The Global Risks Report 2021, 19 January, https://www.weforum.org/reports/the-global-risks-report-2021, (accessed 15 August 2021).
Figure 2: Climate-related risks, opportunities and financial impacts
Source: Taskforce on Climate-related Financial Disclosures, 2017, Implementing the Recommendations of the TCFD, June, p 5.
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PART 1: WHAT DO I NEED TO KNOW ABOUT CLIMATE CHANGE?
WHICH INDUSTRIES ARE IMPACTED BY
CLIMATE CHANGE?
Climate change risks and opportunities permeate
most economic sectors and industries. Analysis by the
Sustainability Accounting Standards Board (SASB)
concludes that 68 out of 77 industry sectors across the
economy are subject to material climate-related risks.4
Although climate risk cuts across almost every sector, its
impacts are differentiated depending on factors such as
the relevant market and geography.
The influential Taskforce on Climate-related Financial
Disclosures (TCFD) has recognised 16 industrial sectors
that are at ‘high risk’ of material climate-related risk.
These sectors traverse the vast majority of the Australian
economy, including:
• financial services – banks, insurance companies,
asset owners (including superannuation funds) and
asset managers;
• energy – oil and gas, coal, electric utilities;
• transportation – air freight and passenger transport,
maritime, rail, trucking, automotive and components;
• materials and buildings – metals and mining,
components, construction materials, capital materials,
real estate management and development; and
• agriculture, food and forest products – beverages,
agriculture, packaged foods and meats, paper and
forest products.
In addition, the health implications of climate change
are widely recognised as being material to organisations
involved in health and human services.
CLIMATE CHANGE KEY CONCEPTS
Appendix 1 of this Guide includes a glossary of key climate
terms and leading frameworks to help you understand the
relevant foundational concepts. It covers commonly used
climate terms such as:
• Emissions – scopes 1, 2 and 3;
• ‘Net zero’ emissions;
• The Paris Agreement;
• Stress testing and scenario analysis.
It provides an overview of two current leading frameworks:
• Taskforce on Climate-related Financial Disclosures (TCFD)
• Sustainability Accounting Standards Board (SASB)
It also references the leading international authority
on climate science, greenhouse gas emissions and the
impacts of climate change:
• The 6th Assessment Report of the United Nations
Intergovernmental Panel on Climate Change (IPCC).
4. Sustainability Accounting Standards Board, 2021, Climate Risk Technical Bulletin, https://www.sasb.org/wp-content/uploads/2021/05/Climate-Risk-Technical-
Bulletin2021-042821.pdf, (accessed 15 August 2021).
9. CLIMATE RISK GOVERNANCE GUIDE
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PART 2:
How do I start my board’s
climate change journey?
This Part of the guide provides a practical guide to assist directors of organisations
near the beginning of their climate change governance journey. It should not
be taken as a checklist of initiatives to guarantee due care and diligence in the
context of your particular board and organisation. However, it is a useful ‘ready
reckoner’ to help you take a constructive governance approach, and to assist in
building organisational capacity to consider climate change.
STAGE 1 STAGE 2 STAGE 3 STAGE 4 STAGE 5
WHERE ARE WE NOW
– BOARD, COMPANY,
MANAGEMENT?
A considered
approach to
complex issues
• Board dynamics
• Assessing
readiness and
capacity
• Introducing
climate change
onto the agenda
APPROPRIATE
GOVERNANCE
STRUCTURES
Embedding sound
foundations,
processes and
structures
• Embedding
appropriate
governance
structures
ACCOUNTABILITY
AND DISCLOSURE
Connecting the
dots to financial
positions and
prospects
• Considering the
implications for
financial position
and prospects
• What should we
disclose?
THE BOARD IN
ACTION – STRATEGY
AND RISK OVERSIGHT
The key
importance of a
forward-looking
lens
• Assessing
materiality
• Strategic
considerations
• Risk monitoring
and oversight
REFLECTING ON
YOUR PROGRESS
Next steps
• Continuous
improvement
• Further resources
10. PART 2: HOW DO I START MY BOARD’S CLIMATE CHANGE JOURNEY?
WHERE ARE WE NOW?
Climate change is an evolving and complex issue with
the potential to significantly impact on organisational
risk, opportunity and strategy. As with any dynamic issue,
consideration may require your organisation to embark
upon a course of reflection and change. In beginning
your climate governance journey, it is important to take a
constructive approach that is sensitive to the varying levels
of understanding around the board table.
CLIMATE CHANGE IN OUR ORGANISATIONAL
CONTEXT — BOARD DYNAMICS
• Why is it important that the board considers climate
change, now? What are the evolving dynamics
(in regulation, in markets and in key stakeholder
preferences) that objectively elevate its significance to
the organisation, its risk, opportunities and strategy?
You can use Part 1 of this guide to help you consider
the relevant issues through a financial, reputational
and liability lens – from potential impacts on your
business operations and supply chains, to resource
costs and availability, shifts in policy and regulation,
to technological developments, and shifts in the
preferences of key stakeholders (investors, insurers,
customers, employees and the community).
• How should climate change be considered in the context
of the best interests of our organisation, its purpose and
values? What are the views of our key stakeholders?
• Does the board have an appropriate level understanding
of climate change, its causes, its dynamics, and
potential risks (and opportunities) for our organisation?
What additional capacity-building may be required?
All board members should have an appropriate level
of understanding of key climate change concepts
such as those in Part 1 of this guide. The greater
the level of potential impacts on your organisation,
the greater the level of understanding that will be
necessary to allow you to undertake informed inquiry
and oversight.
You can also refer to the additional resources set out
in Appendix 4 of this guide. Depending on the size and
nature of your organisation, it may be appropriate to
arrange specific briefings for the board and executive
on current climate-related issues and relevant impacts.
• What should be done to introduce climate change on
the board agenda? What reports or other inputs do we
require from management? Do we need external advice
or assistance?
• Can we have an effective and constructive conversation
about climate change and its dynamics around the
board table? Do we need to consider how we work
together to build consensus? What will be the effect on
board dynamics? Should we bring an external party in to
assist us with this process?
ASSESSING READINESS AND CAPACITY —
ENSURING YOUR BOARD IS PREPARED
• Would the Board Readiness Check assist my board in
getting ready to discuss this topic?
The Board Readiness Check has been developed
by Chapter Zero in the UK with the support of the
Berkeley Partnership and Hughes Hall Centre for
Climate Engagement. It is a useful self-assessment
tool for boards to gauge their current level of
readiness as an organisation and as a collective. It
has been designed to enable boards to self-assess
their ‘Current’ state, understand its implications and,
based on this, specify their intended ‘Target’ state
regarding climate change.
The Board Readiness Check is available here.
A summary of how the Board Readiness Check tool
works is set out in Appendix 3 of this guide.
aicd.com.au/cgia 10
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PART 2: HOW DO I START MY BOARD’S CLIMATE CHANGE JOURNEY?
GOVERNANCE — EMBEDDING SOUND
FOUNDATIONS, PROCESSES AND STRUCTURES
• How are issues associated with climate change
integrated into our board governance (strategic and
oversight) responsibilities? Is this issue receiving
adequate time and focus within the board/committee
agenda?
Should this be a matter for the full board, included
within the remit of a sub-committee (for example,
audit risk) or, for your organisation, does it warrant
a specific sustainability sub-committee?
• What is our organisational policy on climate change?
Do we need a specific policy document?
• In what part(s) of the organisation does operational
responsibility for climate-related issues (identification,
assessment, management and monitoring) reside?
Who is responsible and accountable for this issue within
management? Are we satisfied that relevant staff (or
the experts that they consult) have the appropriate
competence and resources?
Appropriate responsibilities and resourcing will
depend on the nature of your organisation and its
climate-related issues.
• What reports should be made to the board or its
committees, and how often?
• How do we as a board, and senior management (including
legal, governance, finance and risk teams), ensure that we
are staying up to date in this dynamic area?
What resources do we require to do so? What
information and updates are made available by
relevant regulators and industry bodies? Do we need
specialist advice?
• Are our remuneration structures aligned with our
strategic approach to climate change, or do they create
perverse incentives (for example that may favour
investment in assets at risk of being stranded in the
transition to a low-carbon economy)?
THE BOARD IN ACTION — STRATEGIC
PLANNING AND RISK OVERSIGHT
• What are the relevant risks and opportunities for our
organisation – across the short, medium and long term?
At its core, climate change disrupts ‘business as
usual’. This can present both risks and opportunities.
Consider issues such as:
· Have we considered how the changing climate
may impact on our operations and supply chain?
· Are there emerging regulatory or policy
developments that may signal future
market directions?
· What are our competitors doing – and planning
to do?
· What are emerging customer trends and pressures,
and what feedback can we gather?
· What opportunities may this bring for new product
or service development?
· What do our employees think?
· How can a proactive approach help in building
our reputation and brand, and assist us to access
competitive capital and insurance? What are the
consequences if we do not progress?
· How do we balance competing commercial or
resourcing considerations, and short vs
long-term interests?
• What are the relevant risk metrics and benchmarks?
What guidance is available from leading frameworks
such as the Taskforce on Climate-related Financial
Disclosures and Sustainability Accounting Standards
Board? Are there any industry-specific benchmarks
and guides? See Appendix 1 for an overview of these
leading frameworks.
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PART 2: HOW DO I START MY BOARD’S CLIMATE CHANGE JOURNEY?
• How should we consider both climate risk and
opportunity in our normal strategic planning process?
Do we understand the role of stress testing and scenario
analysis to assist in strategic planning?
Stress testing and scenario analysis (as set out in
the Recommendations of the TCFD) have emerged
as key tools to help organisations consider climate
risks and opportunities across the broad range of
potential futures. For some organisations, this will
be a complex exercise involving detailed economic
modelling. For others, it will be a more qualitative
and intuitive process to help you consider how
climate change may impact on ‘business as usual’,
and to sense check your strategy across the range of
potential risks.
See Appendix 1 for more detail on stress testing and
scenario analysis.
• How should climate change be integrated into our
existing risk management framework? Is this framework
appropriate to adequately evaluate and manage
identified climate risks?
• How do we determine which climate-related risks
present a material exposure to our strategy or operations
(in both absolute and relative terms), over what
relevant timeframes? On what basis is the threshold of
‘materiality’ set?
• Is the risk acceptable: that is, within our risk appetite
and tolerance? What actions can we develop to mitigate
the risk consequences to bring it within tolerances?
• How do climate-related risks and opportunities impact
on other risks and opportunities identified by the
organisation? How should we manage it in relation to
those other risk and opportunities?
• How does management determine the order of priority
of each relevant climate-related risk/opportunity?
• Should we introduce specific targets to reduce our
own greenhouse gas emissions? Should this include a
pathway to ‘net zero’ emissions? Over what timeframes?
Should these be aspirational or firm commitments? Have
we considered the strategic and resourcing implications
of those targets, and have a credible plan (or, at a
minimum, a genuine, demonstrable intention to work
towards that target) to achieve them? What are the
reputation and competitive implications if we do not set
and pursue such targets?
• How is management held accountable for implementing
the climate-related policies and strategies set by
the board?
• Do we have the right leadership for the strategic
direction that we want the organisation to take? Do
we need to recruit management with differing skills,
experience or mindset?
REPORTING
• Where we have assessed climate change as a material
issue, how have we assessed its potential impact on our
financial position and prospects?
• For reporting entities, what are the appropriate
disclosures that should be made in our directors’ report
(including the Operating and Financial Review where
relevant). Have we had regard to the Recommendations
of the TCFD – and if not, why?
Directors should refer to guidance issued by ASIC
(Regulatory Guide RG247 (Effective Disclosure in
an Operating Financial Review)) and the AASB
and AUASB (Joint Guidance on Climate-related and
other emerging risk disclosures (April 2019)).
• Have we put specific questions to the CFO (where
applicable) about the impact of material climate
assumptions on asset useful lives, valuation and
impairment, liability provisions, revenues, expenditures
and cash flows? What are the key assumptions made,
and metrics or statements requiring the most judgment?
Has there been adequate disclosure in the financial
statements? Are we satisfied with the effectiveness of
our systems of internal control and risk management
that sit behind this assessment?
• Has our reporting been subject to external audit or
assurance?5
How was that decision reached?
REFLECTING ON YOUR PROGRESS —
NEXT STEPS
Once your board has these strong governance foundations
in place, it is important to approach climate change
governance through the lens of continuous improvement.
This is particularly important for this issue, due to its fluidity.
We have set out some more advanced resources in
Appendix 4 of this guide that can support you in taking the
next step to embed climate change governance maturity in
your organisation.
5. Not all reporting will be subject to audit, many NFP entities are not required to have their accounts audited. Where a board is obtaining information from management, and
resources permit, they may want external assurance over that information.
13. CLIMATE RISK GOVERNANCE GUIDE
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PART 3:
What are the duties
and expectations of
me as a director?
DIRECTORS’ DUTIES
This Part of the guide considers the relevance of
climate change in the context of non-executive
directors’ core duties. While this guide focuses on
duties that apply to company directors incorporated
under the Corporations Act 2001 (Cth) (Corporations
Act), the directors or their equivalents (for example,
management committee members/officers) of
most not-for-profit organisations (NFPs) and
government business entities (GBEs) have similar
duties under common law and specific legislation
(such as applicable state and territory incorporated
associations laws, and public entity governance laws).
Refer here for the AICD’s tool on directors’ duties for
further information.
Where climate change is a material and foreseeable
risk to an organisation, directors will have
obligations to seek to address it as part of their risk
oversight role. To enliven directors’ duties, the risk
(or opportunity) will need to be both foreseeable and
material. The bar for foreseeability is relatively low
and means ‘not far-fetched or fanciful’. Whether a
climate change risk (or opportunity) is material, will
require consideration of the organisation’s strategy,
financial position and prospects in the unique
context of that organisation.
This does not mean that climate change necessarily
needs to be prioritised by directors over any
other foreseeable risk. But it does mean that
directors should inform themselves of the impact
of climate change risks and/or opportunities to
their organisation. If they determine such risks
and/or opportunities are material, directors must
appropriately consider these in their governance of
strategy and risk oversight – in the same manner as
they would any other foreseeable financial risk or
opportunity.
In particular, climate change may be relevant to
a director’s duty to act in the best interests of the
company and their duty of care and diligence.
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PART 3: WHAT ARE THE DUTIES AND EXPECTATIONS OF ME AS A DIRECTOR?
CLIMATE CHANGE AND THE BEST INTERESTS
OF THE COMPANY
Section 181 of the Corporations Act requires directors to
act in good faith, for a proper purpose, and to act in the
best interests of the company. There has been a long-
standing debate on the extent to which directors can or
should have regard to the interests of external stakeholders
in discharging their duty to pursue the ‘best interests’ of
their organisation. Historically, ‘climate change’ was often
considered a ‘stakeholder issue’ - a purely environmental,
‘non-financial, ethical’ issue, and its consistency with the
‘best interests’ of the organisation questioned.
The stakeholder debate has moved on however, with
recognition that consideration of stakeholders such
as customers, employees, the environment and the
community is often consistent with organisational long-
term interests. Put more bluntly, a failure to appropriately
manage those stakeholder interests often risks the best
interests – including financial interests – of the company
and its shareholders/members.
Former Australian High Court judge and financial services
royal commissioner Hon Kenneth Hayne, has gone further
in publicly stating that: ‘a director acting in the best
interests of the company must take account of, and the
board must report publicly on, climate-related risks and
issues relevant to the entity’.6
Whether the foreseeable risks associated with climate
change have a material impact on a corporation’s strategy,
financial position or prospects, the magnitude of that
impact and the appropriate organisational response, are
matters that can only be determined in the unique context
in which an organisation operates.
DUTY OF DUE CARE AND DILIGENCE AND TAKING A
PROACTIVE APPROACH TO CLIMATE GOVERNANCE
Section 180 of the Corporations Act imposes a duty of
due care and diligence upon company directors. This duty
of care and diligence has both subjective and objective
features. Directors are held to the objective standard of
conduct – that of a reasonable person – in the subjective
circumstances faced by that director, in that company.7
The duty of care is an obligation of robust process, rather
than one that dictates any substantive outcomes.
It requires directors to take a proactive and robust
approach to interrogation of foreseeable risks, and
potential material impacts, for corporate strategy and
risk management.
This requires directors to exercise independent judgment
when evaluating contemporary climate change
information and anticipated impacts on their organisation.
Directors have a positive obligation to apply an inquiring
mind to their role, bringing to bear knowledge that
they ought reasonably have known about the entity, its
functions and operational context.
Directors should take a proactive approach to considering
how climate-related risks can be managed and
opportunities seized – particularly in those sectors with
significant climate-related exposures (such as financial
services, resources, energy, infrastructure, materials and
manufacturing, transportation, agribusiness and real
estate, amongst others). This requires directors to form
their own assessment and make their own decisions as to
what action, if any, is to be taken. The questions in Part 2
of this guide aim to support directors in this work.
The greater the materiality of the potential risks, the
greater the degree of interrogation and assurance,
supported by advice from management and/or
independent expert advice, that may be warranted.
Hutley opinions on directors’ duties and
climate change
A series of high-profile opinions by Noel Hutley SC and
Sebastian Hartford-Davis of Counsel in 2016, 2019 and
2021 (known as ‘the Hutley Opinions’) are useful reading
for directors embarking on their climate governance
journey. Refer here, and here, for an overview and links.
6. K Hayne, 2019, “What Kenneth Hayne says about climate change”, Financial Review, 9 December, https://www.afr.com/politics/federal/what-kenneth-hayne-says-about-
climate-change-20191206-p53hiw, (accessed 15 August 2021); J Fernyhough, 2019, “Hayne rebukes directors on climate risk failure”, Financial Review, 9 December, https://www.
afr.com/policy/energy-and-climate/hayne-rebukes-directors-on-climate-risk-failure-20191206-p53hnd, (accessed 15 August 2021).
7. ASIC v Adler (No 1) (2002) 168 FLR 253 at [372] (4) per Santow J; ASIC v Rich (2009) 75 ACSR 1 at 623 [7242] per Austin J.
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PART 3: WHAT ARE THE DUTIES AND EXPECTATIONS OF ME AS A DIRECTOR?
CLIMATE CHANGE AND MISLEADING DISCLOSURE
Where climate change presents material risks to the best
interests of an organisation, including for its financial
position and prospects, directors should also consider how
adequately the risks have been disclosed.
Misleading disclosure occurs where a reasonable person
in the audience would be led into error by the overall
impression that is conveyed. Silence or omission may give
rise to a misleading impression.
Directors must exercise due care and diligence in ensuring
that their organisation does not mislead the market on the
impacts of climate change and the response to that risk –
in the same way as for any other financial risk issue.
Misleading disclosure is most likely to apply to listed
companies (and other reporting entities) that produce
public reports for shareholders. Climate-related misleading
disclosure risks are particularly acute in relation to annual
reports, for which directors are required to attest that a
‘true and fair view’ is presented of a company’s financial
position and performance, and to approve a directors’
report that (amongst other things) outlines material
risks to a company’s prospects.8
Heightened regulatory
and investor expectations on the kinds of climate-related
information required to present a ‘true and fair view’ of
corporate position and prospects, and litigation trends in
this area, are discussed below.
However, misleading disclosure should be considered by all
types of entities, including private companies and NFPs.
This is because misleading disclosure risks can arise in
other kinds of public statement or external representation
– from contracts, to statements made to donors, to
advertising in trade or commerce. This includes misleading
or deceptive conduct under the Australian Consumer
Law (and equivalent State fair trading legislation), which
governs the way in which organisations seek to promote
the ‘green credentials’ of their organisation, or a specific
product or service.
One high-profile misleading disclosure risk associated with
climate change is known as ‘greenwashing’. In general
terms, greenwashing is conduct or representations that
under-states the impact of climate change risks to a
company, over-states the robustness of a company’s
response to those risks, or otherwise over-emphasises
its environmental credentials. ASIC has stated that
greenwashing is an area of its enforcement focus.
HEIGHTENED REGULATORY AND
STAKEHOLDER EXPECTATIONS
The regulatory environment in Australia has changed
significantly in the last five years. Australian regulators
acknowledge the foreseeability of climate-related financial
risks and are largely aligned on the economic/financial
significance of climate-related risk.
Compliance with the governance, strategy, risk
metrics and disclosure framework set out in the TCFD
Recommendations has evolved from ‘gold standard’
to ‘base expectation’ for listed companies in many
jurisdictions. One of the key TCFD Recommendations
relates to stress-testing and scenario planning of business
strategies against a plausible range of climate futures.
REGULATORY EXPECTATIONS
• ASIC
- Regards climate change as a ‘systemic risk that
could have a material impact on the future financial
position, performance or prospects of entities’.9
- ‘Reminds’ listed companies to consider both physical
and transitional climate risk, develop and maintain
strong and effective corporate governance, which
supports prudential risk management and where
climate risk is material, to consider the TCFD
recommendation when reporting.10
- ‘Greenwashing’ is an area of focus for ASIC. ASIC
Commissioner Cathie Armour has encouraged boards
to ‘look out for greenwashing and to ask whether their
company’s disclosure around environmental risks and
opportunities… accurately reflects their practices in
this area’.11
• APRA
- Expects regulated entities to understand and manage
climate-related financial risks through stress testing
and scenario analysis and disclose decision useful
information to the market.
- Development of a draft Prudential Practice Guide12
is underway and APRA will incorporate climate
vulnerability assessments into its stress testing of
the financial system (starting with Australia’s largest
banks this year).
8. Corporations Act 2001 (Cth) sections 295–297.
9. The regulator has updated its regulatory guidance on climate-related financial disclosures made in both offer documents (RG228) and Annual Report Operating and Financial
Reviews (RG247) to refer to the kinds of climate risks described by the TCFD.
10. ASIC, 2021, Corporate Finance Update – Issue 4, March, https://asic.gov.au/about-asic/corporate-publications/newsletters/asic-corporate-finance-update/corporate-
finance-update-issue-4/, (accessed 15 August 2021).
11. C Armour, 2021, “Green clean”, Company Director, 1 July, https://aicd.companydirectors.com.au/membership/company-director-magazine/2021-back-editions/july/the-
regulator, (accessed 17 August 2021).
12. APRA, 2021, Prudential Practice Guide: Draft CPG 229 Climate Change Financial Risks, April, https://www.apra.gov.au/sites/default/files/2021-04/Draft%20CPG%20229%20
Climate%20Change%20Financial%20Risks_1.pdf, (accessed 15 August 2021).
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PART 3: WHAT ARE THE DUTIES AND EXPECTATIONS OF ME AS A DIRECTOR?
• RBA
- Deputy Governor acknowledged that the physical and
transition risks associated with climate change as
‘likely to have first-order economic effects.’13
• Australian Accounting Standards Board and Auditing and
Assurance Standards Board
- Released a joint bulletin stating that climate change-
related assumptions have the potential to be a
material accounting estimation variable, impacting
on asset useful lives, fair valuation, impairments and
provisions for bad and doubtful debts. Although the
guidance is ‘voluntary’, the standard setters made
clear that they ‘expect’ it will be applied by report
preparers and auditors.14
- The Australian position on integration of material
climate-related assumptions into financial statement
accounting estimates has now been echoed in
guidance by the body responsible for international
accounting standards, IFRS.15
INVESTOR EXPECTATIONS
An increasing proportion of mainstream institutional
investors (including the world’s largest investor, BlackRock,
members of the US$52 trillion Climate Action 100+, IIGCC,
PRI,and Net Zero Asset Managers’ Initiative) have intensified
commitments to engaging with investee companies on
climate-related financial risk and disclosure, and set out
accelerated expectations in relation to disclosures. More
recently, focus has centred on how investees plan to
transition to ‘net zero’ in line with Paris Agreement goals.
OTHER STAKEHOLDERS
Stakeholders also have increasingly heightened
expectations in relation to how an organisation considers
and addresses climate change. These include:
• Customers – both consumers and business customers
increasingly expect their suppliers to demonstrate
environmental sustainability in a transparent way. A failure
to meet customer expectations can result in significant
reputational damage, and ultimately lead to a decline in
demand, revenue, competitiveness and profitability.
• Employees – employees are placing increased importance
on alignment between their personal values and those
of their employer. Environmental sustainability, and
climate change in particular, have emerged as key issues
for staff in choosing, and remaining with, an employer.
Organisations with poor climate credentials may find it
increasingly difficult to attract, and retain, top talent.
• Community – changing and increasingly demanding
environmental and social standards from communities
across Australia. Heightened community pressure
may lead to adverse publicity and scrutiny of strategy
and decisions.
NFPs may need to consider the perspectives of
important stakeholders like members, volunteers,
donors, funders and the general public. For example,
a sporting club may need to consider the expectations
of its sponsors on the issue of climate change or have
in place an extreme heat policy. Government funding
grants may also include expectations around climate
change action.
13. G Debelle, 2021, Climate Change and the Economy with the RBA’s Guy Debelle, Public Forum, Centre for Policy Development,17 August, https://cpd.org.au/2019/03/climate-
change-economy-rbas-guy-debelle-public-forum-march-2019-2/, (accessed 17 August 2021).
14. Australian Accounting Standards Board and Australian Auditing and Assurance Standards Board, 2019, Climate-related and other emerging risks disclosures: assessing financial
statement materiality using AASB/IASB Practice Statement 2, April, https://www.aasb.gov.au/admin/file/content102/c3/AASB_AUASB_Joint_Bulletin_Finished.pdf, (accessed
15 August 2021).
15. IFRS Foundation, 2020, Effects of climate-related matters on financial statements, November, https://www.ifrs.org/content/dam/ifrs/supporting-implementation/
documents/effects-of-climate-related-matters-on-financial-statements.pdf, (accessed 15 August 2021).
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PART 3: WHAT ARE THE DUTIES AND EXPECTATIONS OF ME AS A DIRECTOR?
16. McVeigh v REST NSD1333/2018, Federal Court of Australia, http://climatecasechart.com/climate-change-litigation/non-us-case/mcveigh-v-retail-employees-
superannuation-trust/, (accessed 15 August 2021).
LITIGATION RISKS
Climate-related litigation has increased over recent years
with a number of cases, both in Australia and globally,
testing the bounds of government and corporations’
obligations. Some of the most significant recent actions,
in both Australia and internationally, are set out below.
Whilst not all set a binding formal precedent for Australian
organisations, they illustrate the increasing proactivity
of strategic litigants in this space, and may influence the
development of the law in our own jurisdiction.
Recent examples include:
• Emissions reduction targets and credibility of strategy.
In May 2021, the Dutch District Court found that Shell’s
failure to reduce emissions on a trajectory consistent
with the Paris Agreement was a breach of its duty of
care to, and human rights of, Dutch citizens, and ordered
it to increase its emissions reduction policy to 45% by
2030 (against a 2019 baseline). The Court was critical
of Shell’s prevailing emissions reduction policy, finding
that it was ‘not concrete, has many caveats and is
based on monitoring social developments rather than
the company’s own responsibility for achieving a CO2
reduction.’
• Duty of due care and diligence – investing on behalf
of superannuation beneficiaries. In July 2018, an
Australian superannuation fund member sued the
corporate trustee of his superannuation fund REST
alleging a breach of its duty of care on the basis that it
had failed to integrate climate change considerations
into its investment strategy. The matter settled in
November 2020. REST agreed to take further steps
to ensure its investment managers actively consider,
measure, manage and report back on the financial
risks posed by climate change, to commit to a target
of net zero carbon footprint for the fund by 2050,
and to report on portfolio holdings, risk management
processes and decarbonisation progress in line with the
Recommendations of the TCFD.16
• Financial risk disclosures – misleading disclosure and
due care and diligence. In July 2020, a claim was filed in
the Federal Court against the Commonwealth alleging
that the investor information statements issued in
relation to Commonwealth bonds were misleading or
deceptive contrary to section 12DA(1) of the ASIC Act.
This was alleged on the basis that the disclosures did
not contain adequate information about the economic
and fiscal risks associated with climate change, and
associated credit risks. The claim further alleges that, in
approving the disclosure documents, the Secretary to the
Department of Treasury and the CEO of the Australian
Office of Financial Management failed to discharge
their statutory obligation to exercise due care and
diligence under section 25(1) of the Public Governance,
Performance and Accountability Act 2013. The claim
remains on foot, and is unlikely to be heard until 2022.
• Negligence – failure to take reasonable precautions
against the reasonably foreseeable risks associated
with climate change. In January 2019, the South
Australian Royal Commission into the Murray-Darling
Basin Plan published a report concluding that that the
Murray Darling Basin Authority (Authority) had acted
with gross negligence and maladministration in the
manner in which it had (or, more particularly, had not)
taken climate-related issues into account in discharging
its obligation to implement and manage the Murray-
Darling Basin Plan. The Commissioner pointed to failures
including the Authority’s (a) reliance on historical data,
rather than climate change-adjusted forecasts, as the
primary source of authority, (b) treatment of the best
available science as an ‘inconvenience to be worked
around’ rather than as a key input to decision-making,
and (c) its deferral of consideration of climate change
until future strategic cycles.
• Misleading advertising. In February 2020, BP was forced
to withdraw its Advancing Possibilities – We’re Working
to Make Energy Cleaner marketing campaign following
a complaint filed by public interest law firm ClientEarth,
alleging that the ads conveyed a misleading impression
of BP’s focus on low-carbon energy when its investment
in renewable activities represented less than 4% of its
exploration and development spend.
18. CLIMATE RISK GOVERNANCE GUIDE
aicd.com.au/cgia 18
APPENDIX 1:
Glossary of key climate terms
and leading frameworks
KEY CLIMATE TERMS
• Emissions ‘scopes’ –1, 2 and 3
To mitigate the effects of climate change, a
wide-scale transition to a low carbon economy
is required. In order for an entity to set a credible
emissions reductions strategy the organisation’s
emissions profile must first be understood. An
effective emissions reduction strategy covers
emissions across an organisation’s full value
chain, which includes Scope 3 emissions.
The Greenhouse Gas Protocol categorises
greenhouse gas emissions by ‘Scopes’:
- Scope 1 – direct emissions from entity owned or
controlled sources.
- Scope 2 – indirect emissions from the generation
of purchased electricity, steam, heating and
cooling consumed by the entity.
- Scope 3 – includes all other indirect emissions
that occur in an entity’s value chain.
Scope 3 emissions are often the largest part of an
entity’s emissions portfolio and also the hardest
to measure.
• ‘Net zero’ emissions
Net zero emissions refers to achieving a balance
between greenhouse gas emissions produced by
humans and greenhouse gases removed from
the atmosphere. In 2018, the United Nations’
Intergovernmental Panel on Climate Change
Special Report Global Warming of 1.5°C made
clear the imperative of reaching net zero global
emissions by 2050 in order to mitigate the effects
of global warming. In order to reach net zero by
2050, global emissions must be halved by 2030.
As outlined above, countries around the world
with economies representing more than 70%
of greenhouse gas emissions have announced
‘net zero emissions’ economic targets – including
the EU, the UK, South Korea, Japan and China.
In Australia, all States and Territories have
announced net zero by 2050 targets, with a
number (including Victoria) having incorporated
these into law. As at the date of publication, the
Commonwealth Government has not formally
committed to a net zero by 2050 target although
it has said that it would like to achieve that
goal as soon as possible and preferably by 2050.
These emissions reduction commitments are
increasingly being applied across adjacent areas
of regulation – including tariffs and trade, and
capital regulatory requirements.
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APPENDIX 1: GLOSSARY OF KEY CLIMATE TERMS AND LEADING FR AMEWORKS
• IPCC and AR6
The Intergovernmental Panel on Climate Change (IPCC) is a United Nations body that assesses the state of science
relation to climate change. In August 2021 the IPCC published its 6th Assessment Report Climate Change 2021: The
Physical Science Basis (AR6). The report is a product of peer review of more than 14,000 individual studies (themselves
all peer-reviewed), by scientists from 66 countries. It is considered the ‘gold standard’ of climate science.
AR6 concludes that human-induced climate change is already affecting every region across the globe. The Australasia
regional fact sheet (refer to Figure 3 below) details regional changes that include average warming of 1.4°C, an
increase in heat extremes and extreme bushfire danger days, decrease in cold extremes, sea level rise contributing to
increased coastal flooding and shoreline retreat, and projected increases in heavy precipitation and inland flooding.
AR6 includes an online tool, the Interactive Atlas, that allows users to explore specific impacts on their region under
different warming scenarios, across different timeframes.
Figure 3: Regional fact sheet - Australasia
Source: IPCC, 2021, “Regional fact sheet–Australasia”, Sixth Assessment Report, p 1.
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APPENDIX 1: GLOSSARY OF KEY CLIMATE TERMS AND LEADING FR AMEWORKS
• Paris Agreement
In December 2015, 196 countries signed the Paris
Agreement, under which governments have committed
to reducing economic emissions to a level consistent
with limiting global warming to well below 2°C above
pre-industrial averages, and to pursue efforts to limit
warming to 1.5°C. This commitment, in turn, will require
the global economy to transform to a net zero emissions
norm before 2050.
Under the Paris Agreement, countries must submit
their own emissions reductions targets, referred to as
Nationally Determined Contributions (NDC). Australia
submitted its first NDC in 2015 (and reaffirmed this in
2020), with a target to reduce greenhouse gas emissions
by 26% to 28% below 2005 levels by 2030. Every five
years, countries are required to submit more ambitious
NDC targets under the review and rachet mechanism of
the Paris Agreement. Australia has not yet committed to
increasing its emissions reduction targets.
• Stress testing and scenario analysis
Climate change has catalysed a ‘new normal’ for risk
– one in which historical experience alone no longer
provides a proxy for the present or future. However,
the range of plausible climate futures presented by
the changing climate remains radically uncertain.
Stress testing and scenario analysis over a plausible
range of climate-futures has emerged as a critical
risk management and strategic planning tool for an
organisation in the face of such uncertainty.
Scenario analysis is a process for identifying and
assessing the potential implications of a range
of plausible future states, and provides a tool for
organisations to consider how the future might look if
certain trends continue or certain conditions are met.
The necessity to apply a forward-looking lens has been
reinforced by stakeholders across the board (including
investors, regulators and credit ratings agencies).
For some organisations, stress testing and scenario
planning will be a complex exercise involving detailed
economic modelling. For others, it will be a more
qualitative and intuitive process to help you consider
how climate change may impact on ‘business as usual’,
and to sense check your strategy across the range
of potential risks. Either way, at its core, it is a risk
management tool to allow organisations to consider
the spectrum of climate-related risks in the face of
uncertainty. At one end of the spectrum – what if there is
a swift and disorderly transition to a net zero economy?
What does that mean for our organisational strategy
and business plan? What would we need to do to thrive
in that transition? At the other extreme – how would
we be impacted if the climate tips into a high warming
scenario? How are we placed to manage the relevant
physical risk impacts to our business and supply chains?
What risk management and adaptation strategies can
we sensibly consider, now?
Key guidance on stress testing and scenario analysis is
found in the Recommendations of the TCFD.
GOVERNANCE, MANAGEMENT DISCLOSURE –
CURRENT LEADING FRAMEWORKS
Mainstream investors now identify climate change-related
disclosures as decision-useful, particularly in high-risk
sectors (such as energy, infrastructure, transport and
agriculture). Both the physical and economic transition
risks associated with climate change are characterised by
uncertainty. However, the one thing that is certain about
climate change is that the physical and market landscape
of the future will look very different.
Tools to assist corporate risk management in the face
of such uncertainty, such as stress testing and scenario
analysis, have emerged as critical inputs for diligent
governance and strategic planning. Two of the current
leading frameworks are the Taskforce on Climate-related
Financial Disclosures (TCFD) recommendations, and
the Sustainability Accounting Standards Board (SASB)
reporting standards.
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APPENDIX 1: GLOSSARY OF KEY CLIMATE TERMS AND LEADING FR AMEWORKS
TASKFORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES
The recommendations of the G20 Financial Stability Board’s
Taskforce on Climate-related Financial Disclosures are a
recognised key benchmark against which to assess the
strategic approach of corporations to managing climate
change risk. The TCFD recommendations:
• provide a framework for the kind of information that
must be analysed and disclosed in order to truly and
fairly represent (and enable assessment of) the impact of
climate-related risks on financial positions and prospects;
• call for information to be disclosed in a comparable and
consistent form that is decision-useful for investors,
lenders, and insurance underwriters; and
• contemplate not only the disclosures themselves, but the
metrics and targets, strategy and governance processes
within which climate risk issues are managed.
Figure 4: The TCFD recommendations and supporting recommended disclosures
Governance Strategy Risk management Metrics and targets
Disclose the organisation’s
governance around
climate-related risks and
opportunities
Disclose the actual and
potential impacts of
climate-related risks
and opportunities on the
organisation’s businesses,
strategy, and financial
planning where such
information is material.
Disclose how the
organisation identifies,
assesses, and manages
climate-related risks.
Disclose the metrics and
targets used to assess
and manage relevant
climate-related risks and
opportunities where such
information is material.
Recommended Disclosures Recommended Disclosures Recommended Disclosures Recommended Disclosures
a)
Describe the board’s
oversight of climate-
related risks and
opportunities.
a)
Describe the climate-
related risks and
opportunities the
organisation has
identified over the short,
medium, and long term
a) Describe the
organisation’s processes
for identifying and
assessing climate-related
risks.
a)
Disclose the metrics used
by the organisation to
assess climate-related
risks and opportunities
in line with its strategy
and risk management
process.
b)
Describe management’s
role in assessing and
managing climate-
related risks and
opportunities.
b)
Describe the impact of
climate-related risks
and opportunities on the
organisation’s businesses,
strategy, and financial
planning.
b) Describe the
organisation’s processes
for managing climate-
related risks.
b)
Disclose Scope 1, Scope
2, and, if appropriate,
Scope 3 greenhouse gas
(GHG) emissions, and the
related risks.
c)
Describe the resilience
of the organisation’s
strategy, taking into
consideration different
climate-related scenarios,
including a 2°C or
lower scenario.
c)
Describe how processes
for identifying,
assessing, and managing
climate-related risks
are integrated into the
organisation’s overall risk
management.
c)
Describe the targets used
by the organisation to
manage climate-related
risks and opportunities
and performance against
targets.
Source: TCFD, 2017, Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures, June, p 14.
A central requirement of the TCFD is forward-looking stress
testing and scenario analysis across the plausible range
of climate futures, including a ‘well below’ 2°C emissions
pathway consistent with Paris Agreement targets. Since
the publication of the TCFD Recommendations in 2017,
market expectations have continued to focus on the Paris
Agreement ‘stretch’ target of 1.5°C.
The TCFD highlights governance as a foundational building
block of effective climate-related risk and opportunity
management. Without effective climate-related
governance structures in place, a company will not be
able to make informed strategic decision or appropriately
manage the risks.
Investors, regulators and other stakeholders increasingly
expect the TCFD recommendations to be used to navigate
the physical, economic transition and liability risk exposures
relevant to their organisation. In addition, disclosure in
accordance with the TCFD recommendations could in fact
be used as a strategy to publicly demonstrate compliance
with directors’ duties and disclosure obligations.
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APPENDIX 1: GLOSSARY OF KEY CLIMATE TERMS AND LEADING FR AMEWORKS
SUSTAINABILITY ACCOUNTING STANDARDS BOARD
The Sustainability Accounting Standards Board (SASB)
publishes sustainability reporting standards in relation
to ESG issues that are material to investors, including
climate-related issues. Resources include a Conceptual
Framework and Application Guidance, and 77 industry-
based Sustainability Disclosure Standards across 11 sectors
(consumer goods, extractives and minerals processing,
financials, food and beverage, health care, infrastructure,
renewable resources and alternative energy, resource
transformation, services, technology and communications
and transportation).
In April, SASB released its 2021 edition of the Climate
Risk Technical Bulletin (Bulletin). The Bulletin provides
recommendations on how industry-specific climate risk
can be more effectively measured, managed and, disclosed
thereby ensuring markets have the information they need to
price climate-related risks (and opportunities). The Bulletin
finds that climate risk is likely to materially affect almost
every one of the 77 industries covered by SASB’s materiality
map, although the nature of those risks, and likely impact
on the organisation varies across different sectors.17
The Bulletin identifies the categories of climate-related
risk that are most likely to be material for an organisation
in each sector (classified across physical, transition and
regulation risks), and the risk metrics (both quantitative
and qualitative) that are likely to provide decision-useful
information to investors in relation to each risk. Each
sector-specific Standard contains additional detail on the
relevant sustainability issues faced by organisations in
the sector, and further commentary on the risk metrics
recommended for disclosure.
The SASB Standards are voluntary but are favoured by
many investors.
SASB recently merged with the International Integrated
Reporting Council (IIRC) to form the Value Reporting
Framework. This merged entity intends to harmonise the
SASB Standards with another leading ‘integrated reporting’
framework, the IIRC’s Integrated Reporting Framework.
INTERNATIONAL SUSTAINABILITY STANDARDS BOARD
The IFRS Foundation, which is responsible for the
International Accounting Standards that form the basis
of Australian Accounting Standards, is establishing an
International Sustainability Standards Board. This will
set standards for reporting on an entity’s performance
on material sustainability issues. It has announced its
intention to release its first standard, on climate-related
reporting, in mid-2022. If incorporated into Australian
standards, this may further change how Australian entities
report on climate matters.
17. SASB, 2021, Climate Risk – Technical Bulletin, 12 April, https://www.sasb.org/knowledge-hub/climate-risk-technical-bulletin/, (accessed 15 August 2021).
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APPENDIX 2:
World Economic
Forum principles
1. Climate accountability on boards - The board
is ultimately accountable to shareholders for
the long-term stewardship of the company.
Accordingly, the board should be accountable for
the company’s long-term resilience with respect
to potential shifts in the business landscape that
may result from climate change. Failure to do so
may constitute a breach of directors’ duties.
2. Command of the (climate) subject - The board
should ensure that its composition is sufficiently
diverse in knowledge, skills, experience and
background to effectively debate and take
decisions informed by an awareness and
understanding of climate-related threats and
opportunities.
3. Board structure - As the stewards for long-term
performance and resilience, the board should
determine the most effective way to integrate
climate considerations into its structure
and committees.
4. Material risk and opportunity assessment - The
board should ensure that management assesses
the short-, medium- and long-term materiality
of climate-related risks and opportunities for the
company on an ongoing basis. The board should
further ensure that the organisation’s actions
and responses to climate are proportionate to
the materiality of climate to the company.
5. Strategic and organisational integration -
The board should ensure that climate
systemically informs strategic investment
planning and decision-making processes and
is embedded into the management of risk and
opportunities across the organisation.
6. Incentivisation - The board should ensure that
executive incentives are aligned to promote the
long-term prosperity of the company. The board
may want to consider including climate-related
targets and indicators in their executive incentive
schemes, where appropriate. In markets where it
is commonplace to extend variable incentives to
non-executive directors, a similar approach can
be considered.
7. Reporting and disclosure - The board should
ensure that material climate-related risks,
opportunities and strategic decisions are
consistently and transparently disclosed to all
stakeholders – particularly to investors and,
where required, regulators. Such disclosures
should be made in financial filings, such
as annual reports and accounts, and be
subject to the same disclosure governance as
financial reporting.
8. Exchange - The board should maintain regular
exchanges and dialogues with peers, policy
makers, investors and other stakeholders to
encourage the sharing of methodologies and to
stay informed about the latest climate-relevant
risks, regulatory requirements, etc.
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APPENDIX 3:
How the Board
Readiness Check works
CLIMATE CHANGE ACTION LEVEL
1. UNPREPARED
Not sufficiently prepared
to mitigate or adapt
to the risks of climate
change – or realise
the opportunities of
transitioning to the low-
carbon economy.
2. COMPLIANT
Aware of and taking
action to meet current
rules and regulations –
but typically not going
beyond legal obligations
to address bigger
and broader risks and
opportunities.
3. PROACTIVE
Aware of the risks of
climate change and the
opportunities presented
by being a low-carbon
business. Proactively
taking action to address
these which goes beyond
regulations – but is
typically focused within
their business and is
perhaps behind others
in their sector in level
of ambition.
4. LEADING
As for ‘3. Proactive’, but
the action they are taking
is ahead of others in their
sector in level of ambition
and achievement – and
extends across their end-
to-end value chain in
partnership with suppliers,
consumers, producers of
complementary products,
etc. Typically, they are
also leveraging their
low carbon stance as a
source of commercial and
competitive advantage.
The Board Readiness Check18
has been
developed to enable boards to self-
assess their current state, understand its
implications and, based on this, specify
their intended target state and establish
their need for change.
The following outline is adapted from the
Chapter Zero: A climate change boardroom toolkit
(pp 15-20), with Chapter Zero’s permission (a member
of the Climate Governance Initiative network).
4 KEY LEVELS OF ATTAINMENT
Within the tool, there are a number of questions. Each question
has a set of four sample answers each representing a stage on the
continuum of Climate Change Action from ‘1. Unprepared’ to
‘4. Leading’.
For each question, the user is asked which answer best represents
‘Current’ state and intended ‘Target’ state.
In broad terms, the four stages on the continuum are
characterised as follows:
18. Chapter Zero: The Directors’ Climate Forum, Board Readiness Check,https://www.chapterzero.org.uk/board-readiness-check/, (accessed 26 August 2021).
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APPENDIX 3: HOW THE BOARD READINESS CHECK WORKS
5 AREAS OF ASSESSMENT
The questions asked are divided into the following 5 areas of assessment:
A. FOOTPRINT: Understanding and improving your carbon footprint
Covers knowing what your carbon footprint is and its key drivers and taking measurable action to
reduce it.
B. COMPLIANCE: Adhering to the rules on climate change
Covers being clear on duties and obligations under current climate change and emissions rules and
regulations and being sighted on and prepared for policy/regulatory change.
C. SENTIMENT: Ensuring your business is in tune with stakeholder sentiment on climate change
Covers being clear on and aligned/in tune with stakeholder sentiment on climate change. Stakeholder
groups include investors, customers (B2B), consumers, and current/prospective employees.
D. RISK: Ensuring you’re prepared for the impact of climate change on your business
Covers being clear on how the business and operations will be impacted by climate change in future
and having governance, disclosures, plans and resources in place to mitigate any physical and
transition risks (e.g. with regards to supply chain, asset values, financial/cost base, customer base,
compensation claims, etc.).
E. OPPORTUNITIES: Ensuring your business benefits from the transition to a low-carbon economy
Covers being clear on and acting to realise opportunities to deliver enhanced business performance
through the transition to a low carbon economy (e.g. reducing operational cost (resource efficiency),
gaining access to government incentives, leveraging positive impact on brand and reputation to
achieve competitive advantage, etc.).
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APPENDIX 3: HOW THE BOARD READINESS CHECK WORKS
WHAT ARE THE OUTPUTS PROVIDED BY THE SELF-ASSESSMENT – AND HOW TO USE THEM
The tool surfaces ‘current’ vs ‘target’ comparisons for each question, to help the user understand where
and to what extent the business will need to change to achieve its intended ‘target’.
UNPREPARED
No. We get the concept of a carbon footprint in general terms, but we
are not clear in specific terms what it is or how you measure it.
COMPLIANT
We know in measurable terms, but only in the sectors and facilities
which are subject to emissions regulations such as European ETS.
PROACTIVE
We know in measurable terms for all aspects of our in-house
operations – but we still struggle with end-to-end value chain.
LEADING
We have a clear, measurable view for all aspects of our end-to-end
value chain, both internally and externally.
Based on the answers selected for each
question, the Board Readiness Check
returns illustrative implications to
provide guidance on how the ‘current’
and ‘target’ selections made might
impact the business.
The contrast in ‘current’ vs. ‘target’
risk/performance may prompt the
user to adjust their answers for ‘target’
state ambition.
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APPENDIX 3: HOW THE BOARD READINESS CHECK WORKS
WHEN AND HOW TO USE THE BOARD READINESS CHECK
The Board Readiness Check can be used in a wide variety of different scenarios. For example:
1. This is the first time you’re discussing climate action as a board and want to establish your current state and its
implications – and define a target state ambition as a precursor to determining and planning the change required to
achieve your agreed ‘target’.
2. You’re not sure if or why climate action is relevant to your business – and want to find out more about the subject and
the relative current state of your business in order to take an informed view.
3. You’re already on the journey and want to do a quick ‘litmus test’ of the progress you’re making – and what areas for
development remain.
4. You think you’ve already done everything that needs to be done with respect to climate action – but want to undertake
a high-level review to make sure.
STEP 1
Get each board member to fill in
the Self-Assessment in the Board
Readiness Check, based on their
own personal understanding and
views – prior to getting them
together as a group to discuss it.
Doing this has the following
benefits:
i. By using the Self-Assessment
they’ll get familiar with the
issues and potential implications
of different choices.
ii. You’ll get to see any key
disparities in understanding of
‘current’ state and intended
‘target’ state.
iii. You’ll know in advance where to
prompt for evidence to back up
claims (e.g. if someone has said
they think they are ‘4.Leading’
on ‘A. Understanding and
improving your carbon footprint’
- and everyone else has said
‘1. Unprepared’).
STEP 2
Summarise what the aggregated
results tell you.
i. Where is the board aligned on
‘current’ state and where is it
not?
ii. What are the implications
of ‘current’ state in terms of
business performance and risk?
(that is, the need for action).
iii. Where is the board aligned on
‘target’ state and where is it not?
STEP 3
Bring the board together to review.
i. Discuss the aggregate results
above - and to align on (a)
‘current’ state, (b) implications
of ‘current’ state and consequent
need for action/change, and (c)
intended ‘target’ state.
ii. Agree on action plan to
undertake more detailed analysis
and planning to identify specific
improvements.
iii. Agree how to factor climate
action into board level
governance on an ongoing basis
and monitor and report back
on progress and achievement to
the board.
As a whole-of-board exercise, it may be useful to use a facilitator to manage the process.
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APPENDIX 4:
Resource library
GENERAL OVERVIEW OF CLIMATE CHANGE-RELATED
FINANCIAL RISKS
PHYSICAL RISKS
1. IPCC, Climate Change 2021: The
Physical Science Basis, Summary
for Policymakers, August 2021
2. IPCC, Climate Change 2021: The
Physical Science Basis, Australasia
Regional Fact Sheet, August 2021
3. Climate Governance Initiative/
Chapter Zero, Primer on physical
climate risk, July 2020
4. World Economic Forum,
Global Risks Report 16th edn,
January 2021
5. IAG and US National Center for
Atmospheric Research, Severe
Weather in a Changing Climate
(Insurance), v2 September 2020
6. Bureau of Meteorology and CSIRO,
State of the Climate 2020,
November 2020
ECONOMIC TRANSITION RISKS
7. International Energy Agency, Net
Zero by 2050 –A roadmap for the
global energy sector, May 2021
8. BlackRock, Larry Fink’s 2021
Annual letter to clients and CEOs
9. Guy Debelle, Deputy Governor of
the Reserve Bank of Australia,
Speech: Climate Change and
the Economy, March 2019 and
Financial Stability Review in
October 2019
10. Deloitte, A new choice:
Australia’s climate for growth,
November 2020
UNITED NATIONS, SCIENCE
AND THE PARIS AGREEMENT
11. UNFCCC, Paris Agreement
and Nationally-Determined
Contributions (overview)
12. IPCC, Climate Change 2021: The
Physical Science Basis, Summary
for Policymakers, August 2021
13. United Nations, Sustainable
Development Goals
29. aicd.com.au/cgia 29
APPENDIX 4: RESOURCE LIBR ARY
LITIGATION RISK AND
DISCLOSURE
14. Climate Governance Initiative
and Commonwealth Climate and
Law Initiative, Primer on Climate
Change: Directors’ Duties and
Disclosure Obligations – In support
of the Principles for Effective
Climate Governance, June 2021
15. Sustainability Accounting
Standards Board, Climate Risk
Technical Bulletin, April 2021
16. AASB, Climate-related and
other emerging risks disclosures:
assessing financial statement
materiality using AASB Practice
Statement 2, April 2019
17. Deloitte, TCFD reporting
requirements and assurance
considerations: A guide for audit
committees, 2021
18. ASIC, What is ‘greenwashing’ and
what are its potential threats?
July 2021
19. ASIC – RG247 (OFRs) and 228
(prospectuses)
20. MinterEllison, Misleading
climate-related disclosure: are
your verification and disclosure
processes defensible? July 2020
21. Noel Hutley’s 2016 Legal Opinion
on Climate Risks and Directors’
Duties, the 2019 Update and the
2021 Update
CORPORATE GOVERNANCE
AND DIRECTORS’ DUTIES
22. Climate Governance Initiative
and Commonwealth Climate and
Law Initiative, Primer on Climate
Change: Directors’ Duties and
Disclosure Obligations – In support
of the Principles for Effective
Climate Governance, June 2021
23. Climate Governance Initative/
Chapter Zero, Acclimatise and
MinterEllison, Questions to
assist non-executive director
oversight of physical climate risk
management, July 2020
24. Deloitte, Remuneration
Committee update – considering
ESG and climate change,
February 2021
25. Deloitte, TCFD reporting
requirements and assurance
considerations: A guide for audit
committees, 2021
26.
Climate Governance Initative
/Chapter Zero, Change
Management Toolkit
27. Wolff Olins and Chapter Zero,
How can brands battle the
climate crisis?, February 2020
28. MinterEllison, Top five
considerations for meaningful
climate-related corporate
governance, June 2020
29. MinterEllison, The ‘next normal’:
climate change risk governance in
a pandemic age, May 2020
30. Law Institute of Victoria, Directors’
duties: At your peril, July 2021
31. ACSI, ACSI Launches New Climate
Change Policy, April 2021
32. MinterEllison, New Hutley Opinion:
What does it mean for directors?,
April 2021
33. MinterEllison, Understanding
directors’ duties and climate
risk: An interview with Philippe
Joubert, CEO of Earth on Board,
May 2021
POOR ESG GOVERNANCE
AND UNDERPERFORMANCE
34. Principles of Responsible
Investment, Making voting
count: principle-based voting
on shareholder resolutions,
March 2021
35. New York Times, Companies See
Climate Change Hitting Their
Bottom Lines in the Next 5 Years,
4 June 2019
36. Sydney Morning Herald, Mark
Vaile quits Newcastle University
chancellor role amid backlash over
coal links, June 2021
37. The Guardian, ExxonMobil and
Chevron suffer shareholder
rebellions over climate, May 2021
STRESS TESTING AND
SCENARIO PLANNING
38. TCFD, Final Report,
Recommendations od the
Taskforce on Climate-related
Financial Disclosures, June 2017
39. TCFD, Annex, Implementing
the Recommendations of the
Taskforce on Climate-related
Financial Disclosures, June 2017
40.
IPCC, Climate Change 2021: The
Physical Science Basis, Interactive
Altas, August 2021 (note – physical
risk only)
41. CSIRO, Climate Change in
Australia, Projection Tools
(note – physical risk only)
42. Queensland Government,
Climate change (physical) risk
management tool for small
business, September 2020
(note – physical risk only)