As greenhouse gas emissions increase, the level of risk to people, economies, and ecosystems associated with rising global average temperature also increases. Climate related risks can impact on financial decisions both now and into the future and there is a growing demand for useful and transparent climate information by stakeholders to assist in decision making and future strategy.

We recently conducted a Carbon Pledge Measurement and Reporting Review at one of our clients in the Victorian water sector. The review highlighted that some companies and even industries are at various stages of transparency and willingness to participate in emission reduction pursuits. The water sector, in particular the Victoria water sector, is a leader in climate change mitigation and adaptation actions with Water Corporations committing to net-zero greenhouse gas emissions by 2050.

Key Learnings – Carbon Pledge Measurement and Reporting

1. Strategy

Most organisations likely see climate change as a priority in terms of having an obligation to reduce emissions. There should be a clear and transparent linkage between the emission reduction requirements (i.e. Statement of Obligations) and an organisation’s strategy documents.

2. Capturing Corporate Information

Organisations should have a process for capturing corporate information relating to climate change to assist with business efficiencies, improvements, carbon emission reduction pledge progress and future strategies. A register for recording projects and investigations that have not reached implementation stage may assist if concepts and plans need to be revisited.

3. Monitoring Threats to Delivery

Does your organisation know the threats or risks related to energy and emissions reduction? The challenges on this topic can be diverse within an organisation. If threats to delivery are not documented there is limited ability to monitor progress on a periodic basis.

4. Performance Reporting

Tools such as a balanced scorecard approach assist reporting on emissions and renewable energy on a periodic basis (i.e. quarterly). They assist organisations to choose the right areas to manage to achieve their goals.

5. The Importance of Collaboration

Our findings highlighted the importance of collaboration amongst other stakeholders in the sector. A willingness to embrace climate change and reduce emissions with enthusiasm and openness assists in learning and development opportunities for both your organisation and others.

6. Annual Reporting

Has your organisation taken the next step in the Annual Report, moving from reporting on climate change from a compliance perspective to reporting on your climate change strategy? Suggested information that could be included in an annual report includes the current situation in emission reduction pursuits, future strategies and the value created in terms of reduced risk to the environment, efficiency improvements and lower costs. Stakeholders increasingly want to know about your carbon emission reduction journey and this should be included in the Annual Report.

A Call to Action

Stakeholders are expecting increased transparency and willingness to participate in emission reduction pursuits. Reporting of climate-related risks is becoming more urgent and is requiring greater transparency.

I highly recommend reviewing the “Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) “Report released in June 2017. The TCFD structured its recommendations around four thematic areas (governance, strategy, risk management, and metrics and targets) that represent core elements of how organisations operate. The four thematic areas are supported by recommended disclosures that build out the framework with information that will help investors and others understand how to report on an organisation’s climate-related risks and opportunities.

Subsequently, a TCFD Status Report was released in June 2019, focusing on the continued progress of companies in disclosing financial information on climate related risks and opportunities. The key findings of the Status Report include:

• Disclosures of climate-related financial information has increased since 2016, but is still insufficient for investors;

• Greater clarity is needed on the potential financial impact of climate-related issues on companies;

• The majority of companies using scenario analysis do not disclose information on the resilience of their strategies; and

• Mainstreaming climate-related issues requires the involvement of multiple functions.

If you or your organisation would like further information on best practice carbon pledge measurement and reporting, please contact a member of our Risk Consulting team.