Change is needed as asset managers warned about ‘insufficient climate risk reporting’
Change is needed as asset managers warned about ‘insufficient climate risk reporting’
Andrew
“Asset managers are not providing enough information about climate risk“
Financial Stability Board’s Task Force on Climate-Related Financial Disclosures
It is clear climate change is moving higher up the agenda of many organisations but there is always more to be done. One of the key areas of concern is what is being done with regards to risk management and the importance of resilience strategies?
Recently the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD) reported that asset managers are not providing enough information about climate risk, leaving investors with an incomplete picture and inability to make informed choices. It is clear the industry has not yet translated its support for disclosures into its own reporting of risks and opportunities. The report reveals more than 1,500 organisations have expressed their support for the TCFD’s recommendations, which represents an increase of more than 85 per cent since 2019.
Asset managers need to take climate risk identification seriously and assess their portfolios’ exposure to potential physical impact risks such as floods for example. If asset managers fail to act on climate change, they are putting their clients’ assets at risk, with the potential threat of them becoming worthless. According to the TCFD only 1 in 15 asset managers disclose resilience of strategies under different climate scenarios. This is a concern, especially when there is so much talk in the industry about the Paris Agreement and PRA regulatory requirements for financial institutions.
So, what needs to be done?
It is vital asset managers present detailed business resilience scores. This is where robust climate perils data and advanced geolocation combined with property and business data can create powerful portfolio risk management. Portfolio monitoring capabilities can be incorporated to red flag where security may be at risk based on real events such as flood or subsidence surge events.
A recent article in the FT reported that: “Progress towards the TCFD’s end-goals remains slow, though. If the growth rate in climate disclosures since 2017 remained constant in coming years, companies would not be providing all 11 pieces of information that the task force recommends until 2029. Some regulators are now taking action to increase disclosure levels. In March next year, new EU regulation is due to come into force making the online publication of sustainability impacts mandatory. Earlier this year, the UK’s Financial Conduct Authority said all London-listed companies would soon have to make the climate-related disclosures prescribed by the TCFD — or explain why they cannot.”
At D-Risk we provide climate change intelligence to the real estate market and have a suite of flexible data-driven solutions that are designed to help asset managers understand their portfolio climate exposure and meet regulatory expectations. Climate change risk is an issue for everyone – whether you are a financial institution, asset manager, or insurer. We cannot afford to ignore this issue, for the sake of all our futures.
