Disclosure of Climate Change related Financial Risks - YouTube

There isn’t really any doubt that climate change has significant financial impacts.

If you look at the increasing number of weather-related catastrophes,

you can see that the insurance companies are paying a lot more money

to people who have lost their houses or assets as a result of climate change.

There are studies that show that almost $43 trillion of assets and investment

could be wiped off as a result of climate change-related risks.

It’s very important that businesses start planning for climate change.

Unlike what people assume most of the time,

climate change isn’t something far off in the future —

it’s a real threat that can affect investments and business in the long run.

[BBC NEWS ANCHOR] Climate change and the process of global warming could become

one of the biggest risks to economic stability around the world,

according to the governor of the Bank of England.

Mark Carney, speaking in London tonight, warned that the time to act was finite and shrinking.

[MARK CARNEY] The combination of the weight of scientific evidence and the dynamics

of the financial system suggest that, in the fullness of time,

climate change will threaten financial resilience and longer-term prosperity.

[MAZIAR PEIHANI] And the basic problem is that businesses, and corporations in particular,

are not taking into account the risk of climate change seriously.

If you look at the mainstream financial reporting of Canadian banks, for example,

you could see that annual information forums — or management discussions and analysis —

they do not provide any meaningful analysis, in most cases,

of the impacts of climate change on the businesses of these institutions.

[MARK CARNEY] On climate-related financial risk, we’d like to thank Michael Bloomberg

and the members of the industry task force on climate-related financial disclosures.

Last week, they published an excellent set of recommendations that can help transform

market understanding of climate-related risks and opportunities that companies face.

Although this was catalyzed by the FSB in response to a direct request by the G20,

this is a private sector, industry-led effort.

These are recommendations for the market, by the market.

[MAZIAR PEIHANI] The task force recommendations call on companies to disclose

how climate change is affecting their businesses and financial operations,

and what kind of strategy they are adopting in response to climate change.

The task force recommendations are really important because

they can ensure that disclosures of climate change-related financial information are consistent and of higher quality,

so that they allow investors to make informed decisions over the long run.

In terms of the best way to implement the TCFD recommendations,

I think a voluntary approach would be desirable.

So, it’s really important for the leader of the business community and institutional investors,

such as pension funds, to encourage their investment companies to adopt the TCFD recommendations in a timely way.

But if that voluntary adoption doesn’t work,

and markets do not embrace the TCFD recommendations in a timely way, regulators should then take action.

And as I mentioned before, the adoption of the TCFD recommendations would be a win-win situation for everyone.

It would be good for investors because they can make informed decisions,

and would be good for corporations because it would allow them to prepare for climate change and have a strategy to deal with it.

It would also be good for the Canadian economy because it would allow it to operate

on a transparent basis and also transition into a lower-carbon economy.