Russell Picot: TCFD’s Special Advisor on the launch of an investor initiative

The Institutional Investor Group on Climate Change will drive investor work on TCFD implementation

Today [October 31], the Bank of England and the FSB’s Task Force on Climate-related Financial Disclosures (TCFD) open an important two-day conference looking at the use of scenario analysis by companies and financial markets to better assess climate risks, improve their strategic planning and advance their risk management processes.
The discussion today highlights the shift that has taken place in the financial community since Mark Carney’s now famous speech on the tragedy of the horizons – climate change is now a recognised market risk that no serious investor can afford to ignore. However, whilst a growing number of investors are both increasingly aware of climate change impacts and are integrating climate risk and opportunity into their investment decision-making in a manner consistent with their fiduciary duty, many are still on a journey to understand how best to do this.

Once we have developed a comprehensive view on scenario analysis, the programme will then consider green investment ‘impact’ strategies.

I was therefore thrilled to accept an invitation from the board of IIGCC to chair its new Investor Practices programme, which I believe will help accelerate investor action to address climate risk.
This new programme complements the thought leadership work that IIGCC already provides – via its Corporate Programme focused on assessing the resilience of companies to climate risk and shareholder engagement – as well as through its Policy Programme that pursues engagement with policymakers at both a global and EU level. Building from this, it is clear to me that the IIGCC provides a crucial forum to launch a new in-depth programme which will support asset owners and managers to better assess and manage both climate risk and opportunity and to report on their actions effectively.
This new IIGCC Investor Practices programme will initially have three key work streams:
1. Governance – securing board-level commitment and integrating this throughout the organisation;

2. Specific strategic tools and metrics for analysing and integrating climate risks and opportunities across asset classes (focusing initially on scenario analysis); and3. Practical support and guidance for IIGCC members – both asset managers and asset owners – on their climate disclosures, in line with TCFD recommendations.

The work stream on ‘governance’ will aim to facilitate swift and informative peer-to-peer learning by sharing best practice from investors already pursuing an active response to climate risk by integrating it into wider investment practice and strategic asset allocation. Part of this work will address how to strengthen engagement on climate change with pension fund trustees, and how to encourage investment consultants to provide the best possible advice relating to the management and disclosure of climate risk.
The second key work stream in the new programme will set out to develop a roadmap explaining what strategies, tools and metrics are available to investors across asset classes to better manage climate risk and opportunity. One early element of this work will aim to assist IIGCC members implementing scenario analysis as part of their efforts to ensure more effective disclosure of climate-related risks and opportunities. Once we have developed a comprehensive view on scenario analysis, the programme will then consider green investment ‘impact’ strategies.
The third key strand of work within the new IIGCC Investor Practices programme will be an in depth facilitated dialogue between IIGCC’s growing membership on disclosure by both asset owners and asset managers. Most specifically how do we actually do this? What are the steps required if we want to report against the TCFD recommendations? What does ‘good ‘disclosure look like over time? When do we talk to the auditors and other service providers? The goal of this work is the prompt development of pragmatic guidance.
As the scope and scale of this ambitious programme implies, we have no time to lose.

Full details of the programme, its structure and which investors are leading each working group will be explained at IIGCC’s Members Meeting on 29th November. For more information about that event, how to participate in the Investor Practices Programme or about IIGCC membership please contact Stephanie Pfeifer, CEO, IIGCC.

Russell Picot is a TCFD Special Advisor, former Group Chief Accounting Officer, HSBC, and Chair of the Trustee board of the HSBC Bank (UK) Pension Fund.