Experts gathered for the Swiss Climate Reporting Forum 2024 underscored that purpose is at least as important as urgency, disclosure is larger than the sum of its parts, and even uncovered the elephant in the room.
Three main takeaways emerged from the discussions:
Purpose of climate reporting: Climate reporting is a means to a greater end. Disclosure should serve as evidence of progress towards a decarbonised and resilient economy.
Disclosure requirements: Climate risk integration, assessment, and scenario analysis are crucial. When tailored to business cases, scenario analysis can significantly enhance corporate strategy.
Physical climate risk exposure: It is on the rise, in operations, supply chains, and sales markets. In tandem, another related type of risk is rising too—climate litigation risk. This is the elephant in the room, and thanks to initiatives like KlimaSeniorinnen, the pachyderm cannot hide away as easily as before.
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CelsiusPro organised two focus sessions. Here are the key messages.
Climate Risk Management: Identify and Assess the Financial Impact of Climate Risk
Integrating climate risks and opportunities into operations is not limited to a regulotary disclosure exercise, it brings value and goes beyond reporting.
Companies must be prepared for a rise in climate-related risks. The environment is changing and tipping points might accelerate impacts. Civil authorities, shareholders, and pension funds are increasingly legally retaliating against companies due to climate misconduct episodes.
Climate risk analysis goes beyond understanding risk exposure of operations. Assessing how climate risks may impact supply chains and demand in sales markets is crucial.
While sustainability ratings improve public disclosure and transparency, they have limitations. Climate impacts and risks are given minimal weight, so a strong rating does not necessarily guarantee strong climate performance.
Linking climate to financial incentives and senior management compensation is a growing trend. The CFO is becoming a key figure in controlling climate metrics.
Strategic Climate Risk Management: Align Business Strategy with Climate Risk Insights
Senior management support is a crucial pillar for efficient climate strategies. However, convincing clients is also critical and poses significant challenges. When implementing new climate strategies, companies should recognize how long it can take for their clients to adopt new technologies or break routines.
In general, businesses and the population in Switzerland see no urgency in aligning business strategy with climate risk. However, there should be given the recent exacerbated impacts of extreme weather events in the country.
When aligning climate strategy with the overall business strategy, companies must consider different climate scenarios to achieve long-term business goals.
Data for informing investment portfolio capital allocation remains high-level and limited to listed equities. This affects both physical and transition climate risk assessments and slows the advancement of high-quality ESG investing instruments.
The lack of quality climate-related data leads investors to shy away from climate as an investment theme, fearing entering into allegations of greenwashing or misleading investor communication, for example.
