Climate-competence gap

Why is it so difficult to get climate issues onto the board level agenda? Is TCFD a solution?

I recently heard the phrase climate competence gap and it really resonated with me. Jane Stevenson, CDP Engagement Director to the Task Force on Climate-Related Financial Disclosure (TCFD) was speaking at a Carbon Credentials event and invoked the phrase when describing a barrier that many of us will be familiar with. Namely, that climate-related issues are seldom well understood at Board level and are even less likely to be championed by the members of the Board.

Why is it so difficult to get climate issues onto the board level agenda?

What can we do to bridge this disconnect between the senior decision makers in our organisations and the overwhelming evidence that companies need to act now to ensure we stay below a 2-degree warming scenario?

Might the answer be the recent recommendations to come out from the Task Force on Climate-Related Financial Disclosure?

There are 3 key reasons why these recommendations could help you achieve greater traction at Board level.

1. It’s an industry-led initiative.

The recommendations have been steadily increasing in prominence since their launch last June as a result of their credibility and pragmatic nature.

The TCFD is backed by key industry figures, it is chaired by Michael Bloomberg and was instigated by Mark Carney in his role as chair of the Financial Stability Board. This gives the recommendations credibility that is more likely resonate at Board level than previous disclosure initiatives.

2. They have an investor focus.

The purpose of the TCFD recommendations is to improve financial disclosure so that investors can make better-informed decisions on where to deploy their capital. Investors are becoming increasingly aware of the risk that climate change can have of devaluing an organisation or rendering it obsolete. Andrew Parry, Head of Sustainable Investment at Hermes Investment Management, stated at one of our recent events that organisations need to be conscious of not just having stranded assets but stranded business models as well.

Investors will be looking for companies to disclose inline with the TCFD so they can make their investment decisions. Boards that are not managing climate-related risks could find themselves struggling to retain or attract investment.

3. Scenario analysis will change the game

Scenario analysis is a key recommendation that focuses on the resilience of organisational strategy. Companies must consider not just how they impact the climate but how the climate will impact them. This is still a new area for most organisations and is being developed, yet it is clear that we cannot fully understand how a company will respond to different scenarios without exploring the Board’s decision-making capabilities and increasing their competence to the risks that they face.

So what does this tell us? The TCFD recommendations have potential, more than previous initiatives, to resonate with your Board. You have an opportunity to leverage the recommendations to get buy-in at a senior level and drive the change that underpins your company’s disclosure.

For more information on how you can prepare effectively for the recommendations, get in touch with us.