Most organisations will be familiar with the increasing demands for disclosure from the finance sector, often arriving in the form of questionnaires that request detailed information on company operations and how they impact on the environment and wider society. These initiatives have mostly originated within the investment community and are set to develop further with the increasing use of taxonomies classifying organisations in terms of their overall sustainability, particularly as customers want to understand what is happening with their investments and avoid greenwashing.
There are other finance initiatives that approach sustainability from a somewhat different perspective. Rather than focus on impact on the external environment they are concerned with the effects of climate change (initially) on the financial performance of the customer portfolios of banks, insurers and investors. The Task Force on Climate-related Financial Disclosures (TCFD) is probably the best known with its recommendations on climate- related risk disclosure (with a nature-related version TNFD coming soon).
TCFD (and TNFD) are different in the sense that they require understanding of climate-related impacts associated with business over long timescales (decades) with all the uncertainties that entails and further identifying the associated future financial implications of these impacts. This connects sustainability into the mainstream of finance including considerations of capital and operating expenditure, revenues and financial viability. It presents a potentially fundamental challenge to the business strategy in the context of the transition to a low carbon, sustainable planet.
How are businesses responding to this challenge, what tools and techniques are being developed (and what are their limitations)?
Dr Paul Pritchard
Senior Associate, Satarla
Dr Paul Pritchard has wide experience in corporate sustainability with a focus on financial services. Originally an environmental chemist he worked in the oil and gas sector before joining RSA Insurance Group where he initially supported the investment function, later becoming Group Environmental Adviser. He now works on climate related services for a range of finance and other organisations , supporting Aviva’s external expert climate risk panel, authoring the BSI/BEIS Sustainable Finance Framework Guide (PAS7340) and joint authoring a guide to TCFD. He has served as Vice Chairman of IEMA and as a Fellow at the University of Cambridge Institute for Sustainability Leadership (CISL) and is currently chair of the UK sustainable finance standards committee (BSI).