Chapter 5

Report

  1. Introduction
  2. Step 1: Identify the relevant reporting mechanisms for your company
  3. Step 2: Gather the information required for climate reporting
  4. Step 3: Report in line with key standards and regulations
  5. Step 4: Get assurance for your climate reporting
  6. Learn more
    1. Understand the importance of climate-related financial risks and opportunities
    2. Glossary
The Carbon Trust
Explained byThe Carbon Trust

Understand the importance of climate-related financial risks and opportunities

Climate-related financial risks and opportunities differ from more traditional impacts on your business in four key ways. They are:

  1. Systemic: the risks and opportunities of climate change will impact all agents and actors within the economy. It is therefore vital to understand your business’s critical dependencies within the wider system.

  2. Non-linear: when it comes to climate change, past trends are not necessarily strong predictors of future outcomes. It is hard to predict the frequency and severity of extreme weather events, and therefore your business must plan for different scenarios.

  3. Foreseeable: due to extensive scientific analysis, we know with certainty that climate change will materialise and is dependent on short term actions.

  4. Irreversible: as the environment has certain boundaries, tipping points and feedback loops beyond which we cannot reverse damage done, it is vital to understand and manage your business’s exposure to these serious risks.

Broadly, your business’s climate-related risks and opportunities will fall into two main categories:

  1. Physical risks: exposure to the physical impacts of climate change that could, for instance, present risks to your supply chain or open up a new way of doing business.

  2. Transition risks: exposure to regulatory, litigation or technological risks and opportunities from the Net Zero transition, which could potentially occur in a non-linear or disorderly way.