Climate change is rapidly emerging as a threat to the stability of our financial systems.
More frequent and severe weather events are damaging infrastructure and disrupting supply chains. Transition to a lower carbon economy is bringing new policies, regulations and rapid changes to market dynamics. Some carbon-intensive companies are already facing lawsuits over their contributions to climate change.
Together these trends threaten to bring serious financial risks to companies and their investors, lenders and insurers.
That's why, in 2015, the Financial Stability Board (FSB) formed the Task Force on Climate-related Financial Disclosures (TCFD) and asked it to recommend how companies should disclose their material climate-related risks to financial stakeholders.
Since then, many banks, pension funds, asset managers, insurers and others have put growing pressure on companies to apply the TCFD recommendations and hundreds of companies have signed up to do so.
For most companies, assessing, disclosing and responding to climate-risk is a new challenge. KPMG professionals can help. KPMG can support clients in by making sense of the TCFD recommendations. We, and work shoulder-to-shoulder with you to identify climate-related risks and opportunities, understand the financial implications, and incorporate relevant disclosures into financial filings.
How we can help
KPMG can provide bespoke services to help clients address climate-related financial risks. Our support covers the following areas:
- Assess and improve readiness for reporting: Using advanced tools, KPMG professionals can evaluate the extent to which your business’s processes, methods and disclosures currently fulfill the TCFD recommendations. We can benchmark your company’s performance against industry best practice to show where you stand in the market.
- Map climate-related risks: KPMG specialists can help you to understand your company’s exposure both to the physical effects of climate change and to the likely regulatory and economic impacts of the shift to a low-carbon economy. We can identify the areas of your business, as well as the countries where your operations are located, which are – or will be – most affected by climate change.
- Use scenario analysis to assess resilience: In line with the TCFD recommendations, KPMG can help you understand how climate-related risks and opportunities could affect your business in a variety of regulatory, economic and climate scenarios. We can explore what these scenarios would mean for your business in the short, medium and long term and develop tools and procedures to assess and quantify the potential financial impacts.
- Inform business strategy: KPMG professionals can help you identify the climate risks that are most pressing for your company. We can provide recommendations on how to develop a robust climate resilience strategy for operations and product portfolios taking into consideration the different scenarios that could pan out in the future.
- Adapt investment strategies: KPMG specialists can work with asset owners and managers to review and adapt their investment strategies in order to reduce exposure to climate-related risk.
- Manage and report on risks: KPMG can help you define appropriate data collection systems, metrics and targets to monitor, manage and report on climate-related risks in line with the TCFD recommendations. We can provide advice on how best to disclose your climate-related risks in your financial disclosures and provide good practice examples to guide your reporting.