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Marsh & McLennan Cos. Inc.’s Global Risk Center and nongovernmental organization CDP Worldwide have launched a new initiative to outline best practices for companies to assess and disclose their climate resiliency.
The announcement comes about one year after the release of the final recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, which at the request of the Group of 20 nations released the recommendations to guide companies in assessing the material risks climate change poses to their operations and develop plans to mitigate these risks. The recommendations cover four core elements: governance, strategy, risk management and metrics and targets.
The initiative aims to offer practical guidance to businesses seeking to overcome the so-called “implementation gap” in effectively adopting the task force’s disclosure recommendations, according to a Marsh & McLennan statement on Monday.
“Climate risks and opportunities are not abstract concepts,” Alex Wittenberg, executive director of the Global Risk Center in New York, said in the statement. “They are essential for creating a business model that delivers long-term value.
“Climate-related risks and opportunities and the associated transition and regulatory changes are going to have a tremendous impact on businesses over the next decade,” he continued. “The TCFD framework is a robust approach for companies to understand and build their climate resiliency.”
The partnership began with the Monday release of a joint report called Reporting Climate Resilience: The Challenges Ahead, which identified three top challenges for companies adopting the recommendations: ensuring leadership support for enhanced disclosure, revising risk assessment processes and applying scenario analysis to climate change, meaning assessing scenarios where little action is taken to combat climate change and scenarios where policy action is taken to limit global warming.
“The disclosure of climate impact, risk and opportunity is the foundation of both investment accountability and opportunity,” Jane Stevensen, CDP’s engagement director to the task force based in London, said in the statement. “What gets measured gets managed. The real gain for companies in disclosing climate-related risks is the process itself, which clarifies new risks and business impacts critical to long-term sustainable success.”
In early 2019, the Global Risk Center and CDP, formerly known as the Carbon Disclosure Project, will release additional research providing guidance and case studies for organizations on how to implement the task force’s framework.
Swiss Re Ltd. helped develop the task force recommendations and said it would voluntarily adopt the recommendations last year. The reinsurer said it will not provide insurance or reinsurance to businesses with more than 30% thermal coal exposure starting Monday.
Insurers and reinsurers will benefit from a voluntary global framework established for climate risk disclosure released on Wednesday.