Companies are increasingly under pressure to manage their climate-related risk exposure. Mandatory climate risk disclosure (in line with the TCFD recommendations) is quickly becoming compulsory across a number of jurisdictions. For example, it is compulsory for certain listed companies in the UK and New Zealand, and is currently being reviewed by the European Union, amongst others.
A key feature of the TCFD recommendations is the requirement to test strategic resilience into the future using scenario analysis. The TCFD believes that scenario analysis can enable organisations to secure a clearer understanding of the strategic implications of climate-related risks and opportunities. It can also promote greater engagement with stakeholders, investors, lenders, and insurance underwriters, as to how the organisation is positioning itself in light of these risks and opportunities.
Scenario analysis facilitates the identification of opportunities offered in the low-carbon economy. Companies that act first to adapt to changing market conditions will be ahead of the competition, and will be able to take advantage of new market, regulatory and policy incentives, as well as access to growing green finance markets.
Enrol in this course to learn more about conducting a scenario analysis.
First complete the course Climate-related financial disclosures – continuing the journey.