New Directions in Managing Climate Risks

January 28, 2022

Measuring & Reporting Climate-related Transition Risk

Sustainable prosperity requires growth to be maintained at a rate which ensures minimal economic problems for future generations.

Traditional business models simply measure success in terms of the profits generated from assets that we have exploited, without considering the degree to which those activities might have stagnated human development and opportunity. It is therefore useful to understand the scale of environmental and social impact of growth, relative to the environmental and regulatory capacity of each case study, in order to assess its ‘sustainability’ level.

Voluntary disclosure practice encourages data submissions which describe resource usage by companies, but this alone cannot overcome two important challenges for the long-term investor. The challenges of mitigating ‘transition risk’ and managing the effects of natural resource shortages requires some understanding of financial affordability; how much negative Environmental & Social (ES) impact can we ‘afford’ based on a global or national ES ‘budget’.

Track Carbon is currently working to find a suitable methodology for businesses to recognise financially material risks that arise during their transition from carbon intensive practices to a more energy efficient, low carbon emissions pathway. Sectorial impacts associated with the transition pathway of a business must firstly be identified in order to understand the probable financial impact on a business.

We have developed the first phase of our software which helps to track and better understand climate-related transition risks. We will be looking for organisations to test this, in order to gain feedback.

TrackCarbon’s team has engaged with the CDSB and ICAEW’s Sustainability teams to gain further insight into the topic of accounting for climate risks, specifically transition risks.

If you are interested in our consultative services, or trialling our product, please do get in contact via the email address:

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