Climate Risk Advisory

Coming from a similar perspective to fellow users, in advising investors, a key risk is reputational risk, resulting from litigation or societal views.  In Australia we have seen litigation against pension funds on the grounds of climate change disclosures and are seeing regulators fining companies for “greenwashing”.  Regardless of whether claims have a strong factual basis, the reputational damage occurs regardless and can be material.

Providing climate risk-related advice is an advisory opportunity, however the bigger opportunity is to make the right investment recommendations and pick the right winners from this energy transition as our fees are partly linked to client assets under advice, so we are aligned with clients. Particularly, when the impacts of climate change on investments can be so binary i.e. assets with strong coal linkages are in a death spiral vs battery opportunities which are experiencing very short payback periods.

A recent tipping point were ‘Net Zero commitments’ from pension funds in Australia.  Within a 6-12 month period, almost all funds had make net zero commitments, possibly with interim targets, whilst developing credible pathways to get there.  Now there are billions of dollars being invested in line with these net zero targets.

Angela Ruchin, Australia

2 thoughts on “Climate Risk Advisory

  1. Nicky Post author

    Sounds like there is some great progressive thinking, and that the future ESG risk spectrum will be very diverse  – according the APRA announcements it seems to be moving to “encompassing climate change, human rights violations in supply chains and corruption, to name a few examples), and may impact the financial performance of investments in a wide variety of ways (e.g. deterring ethically conscious investors and customers, reputational harm, litigation and regulatory enforcement action and so on)”. 

    From 6 April 2022, over 1,300 of the largest UK-registered companies and financial institutions have to disclose climate-related financial information on a mandatory basis – in line with recommendations from the TCFD. This includes many of the UK’s largest traded companies, banks and insurers, as well as private companies with over 500 employees and £500 million in turnover.  Hopefully the ESG reporting will also widen here –  and create a tipping point. -Nicola Anne Lumb, UK

  2. hahamama Post author

    I agree Nicola that TCFDs have a real opportunity to be a catalyst for change. Having spent many years as a General Counsel and Company Secretary I have seen the difference that s172 Companies Act has made to company behaviours and getting over the misapprehension that companies have to act only in the best interests of their shareholders. It will be really interesting to see if any other companies follow the example of Faith in Nature  to appoint a director to represent nature on their board. https://www.theguardian.com/environment/2022/sep/22/eco-beauty-company-faith-in-nature-board-directors
    Fiona Penhallurick, UK

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