An interesting article from GreenBiz on how better disclosures of risks/impacts from climate change on corresponding businesses could lead to better investments and a better way of combating the risk itself.
In this context, the article argues that we need greater tranparency from companies and investors about the impacts of climate-related risks and opportunities and how they can affect revenues, expenditures, estimates of future cash flows, assets and liabilities. Mainstream financial disclosures, made via a standardized voluntary framework, is the best way to make that transparency accessible to a wide variety of market participants.
The Financial Stability Board’s (FSB) Task Force on Climate-related Disclosures has just released its draft recommendations for such a framework. The goal of these disclosures — designed to apply to organizations in all sectors — is to provide relevant, forward-looking information to investors, lenders and insurance underwriters on the potential financial impacts of climate-related risks and opportunities, as well as their management.
Adopting these recommendations will require organizations to link issues around climate with corporate and investment strategy, risk and opportunity analysis — a timely development, given the recent close of the COP22 climate meeting in Marrakesh.
The new guidelines stem from a concern among FSB members (which include G20 finance ministers and Central Bank governors) about the potentially disruptive effect of the transition to a low-carbon economy on the stability of global financial systems.
Read more from here.