Climate related risks & opportunities mapping
CONSULTING - EXTRA-FINANCIAL REPORTING | ESG
(CSRD - Corporate Sustainability Reporting Directive / TCFD - Task force on Climate-related Financial Disclosure)

EXTRA-FINANCIAL REPORTING (SUSTAINABILITY, ESG): GENERALISATION AND STANDARDISATION OF CLIMATE REPORTING REQUIREMENTS (CSRD / TCFD)

 
Your company is probably already disclosing on its climate strategy, whether of its own initiative, or in compliance with existing regulations under the Non-Financial Reporting Directive if you operate in the EU. The ESG regulatory reporting landscape is set for signicant changes with the enactment & transposition of the Corporate Sustainability Reporting Directive (CSRD), and/or sustainability standards to be issued by the recently established ISSB (International Sustainability Standards Board). The CSRD should be transposed in national law by end 2022 and enter into force in January 2024, in disclosures on the 2023 fiscal year. Among the many changes brought by this directive is the mandatory reporting framework set forth by the European standards (ESRS – European Sustainability Reporting Standards) currently being drawn up by the European Financial Reporting Advisory Group. Climate change is a major topic in this evolution of the regulatory framework.

Incorporating the TCFD recommendations published in June 2017 (Task force on Climate-related Financial Disclosure), the future European climate reporting standard is based on the double materiality principle: while climate reporting currently and in practice focuses mainly on footprint reduction, it will have to also cover the impacts of climate change on your organisation: relevance and sustainability of the business model, market structure and dynamics, regulatory environment, image & reputation, industrial assets, etc. . The identification and assessment of these risks and opportunities is at the core of the TCFD and reporting recommendations currently being developed in Europe, which is also expected to underpin the future ISSB publications.

The CSRD and the European reporting standards are part of a Sustainability package developed by the European Commission, together with the Taxonomy Regulation and the Sustainable Finance Disclosure Regulation (SFDR) to ensure consistency between the different reporting requirements.

Also factoring in regulatory changes expected from the SEC (Securities Exchange Commission) in the United States in the short term, which will have an impact on Foreign Private Issuers, non-financial and specifically climate-related reporting requirements are due for a complete overhaul in a relatively short timeframe.

The future European standard, a change of scale for climate reporting

Climate related risks & opportunities mapping

The CSRD will make non-financial reporting an obligation for a significantly increased number of companies:

  • listed SMEs, exceeding 2 of the 3 following criteria: balance sheet of € 4m, € 8m turnover, 50 employees in average over the fiscal year
  • listed or private “large companies”, i.e. exceeding 2 of the 3 following criteria: balance sheet of € 20m, € 40m turnover, 250 employees in average over the fiscal year.

TRANSITION RISK & OPPORTUNITIES AND PHYSICAL RISKS

As the basis for future sustainability reporting, the double materiality principle implies the ability to identify & analyse climate-related risks & opportunities. The TCFD’s recommendations distinguishes two categories:

transition risks and opportunities, related to the transition to a low-carbon economy

physical risks, resulting from damage directly and indirectly caused by climate change, whether event-driven (“acute” risks) or developing on the longer term (“chronic” risks)

Transition risk & opportunities

Physical risks

Climat change - physical risks

Expanding on our experience in Enterprise Risk Management (ERM) and our partnership with leading experts in physical risk analysis, we can assist your organisation with a unique approach on the analysis of transition risk and opportunities, with the ability to also cover physical risks – combining distinct methodologies in a unified approach.

CLIMATE CHANGE RISKS AND OPPORTUNITIES ANALYSIS

The analysis of risks and opportunities related to climate change poses many challenges in terms of time horizon, variety of topics, impact assessment and the availability of information, particularly quantitative information over long time horizons.

These challenges resonate with changes already well under way in ERM, which we have already been able to integrate into several projects (integration of opportunities, extension of the time horizon for analysis & assessment, etc.). Arengi is uniquely posiitoned to support your climate risk & opportunity review, using concepts and methodologies the effectiveness which validity was already confirmed in several recent projects.

Climate change related risks and opportunities mapping

Our pragmatic approach allows highlighting in a simple and visual way its challenges and priorities for action, or reporting, but also laying the foundations of a framework to manage climate risks & opportunities, helping to refine identification and prioritisation over successive iterations.

PHYSICAL RISK ANALYSIS

We are able to integrate into our approach recognised experts in physical risk analysis, with the science data and tools to assess the exposure of your assets to the main climate threats (wind, flooding, coastal flooding, heat waves, water stress, etc.) by 2030 and 2050. This assessment is carried out according to the IPCC’s Representative Concentration Pathway (RCP) scenarios and Shared Socioeconomic Pathways (SSP) scenarios.

Arengi
It’s also ArengiBox

Based on the hundreds of consulting projects delivered over the past 15 years, we have developed ArengiBox, a digital platform to support your risk management approaches. Scalable, intuitive, in constant evolution, deployed in SaaS mode (but not only), designed by risk management professionals for risk management professionals, ArengiBox is also a gateway to our risk management knowledge databases.

Arengi
It’s also ArengiBox

Based on the hundreds of consulting projects delivered over the past 15 years, we have developed ArengiBox, a digital platform to support your risk management approaches. Scalable, intuitive, in constant evolution, deployed in SaaS mode (but not only), designed by risk management professionals for risk management professionals, ArengiBox is also a gateway to our risk management knowledge databases.