5
min read

Economic consequences of changing climate pose a significant threat to financial stability.

Novel sustainability metrics have the potential to drive major decisions in investment planning.

We'll talk about the role climate-related financial disclosures play in organizational decision-making, as well as the distinctions between physical risk and transition risk. Industrial activities and fossil fuels are the leading causes of climate change, and disruptions in key sectors such as the power and transportation industries can drastically impact businesses. This presentation is intended to help stakeholders identify and manage the risks associated with these impacts and capitalize on new opportunities related to climate change.

The economic and social consequences of extreme and frequent weather events, such as drought, extreme temperatures and flooding, can seriously disrupt the functioning of our financial system. This increases the risk of losses in the financial sector.

The Financial Stability Board set up the Task Force on Climate-Related Financial Disclosures. The TCFD establishes crucial principles and provides guidelines for companies to disclose climate change risks consistently. It marks the beginning of a new era of post-industrial and technological revolution.

Novel sustainability metrics have the potential to drive major decisions in investment planning. The transition to the low-carbon economy and potential damages caused by natural disasters will have an impact on business operations. Companies need to develop robust strategies to address environment issues and the carbon tax.

Physical climate risks, on the other hand, are site-specific and completely dependent on the specifics of the region in which your agriculture company is located. On a daily basis, local climate hazards such as droughts and hurricanes have an impact on the valuation of your assets, increasing your insurance premiums, and, as a result, the day-to-day costs of running your agricultural business.

The United Nations played a key role in developing this far-reaching climate action, which was supported by the Intergovernmental Panel on Climate Change (IPCC), an international institution comprised of experts which helps generate and assess scientific information pertaining to climate change. In 2015, world leaders gathered at COP21 and signed the Paris Agreement to curb global warming. This agreement aims to keep global warming to no more than 2° C above pre-industrial levels. The agreement requires immediate economic and social transformation, based on decarbonization.

In order to reduce net global carbon emission by 50% between 2010 and 2050, companies must reduce their direct, indirect, and supply chain greenhouse gas emissions. This decarbonization requires structural change in the economy. The guidelines require all businesses to disclose their direct and indirect greenhouse gas (GHG) emissions. The assessment is novel for most companies, and the guidelines recommend that they include climate change in their evaluation of business risk.

Climate change is a change in the statistical distribution of weather patterns when that change lasts for an extended period of time. The Earth's atmosphere and oceans have warmed, the amounts of snow and ice have diminished, and sea level has risen.

As organizations face increasing pressure to both understand and manage physical and transitional risks, 15Rock is uniquely positioned to help with the latter. We take a quantitative, independent approach to evaluating, managing, and investing in transitional risk that we believe is critical to making confident, long-term balance sheet and capital allocation decisions.

Melania Berbatova, Ph.D

Machine Learning Engineer

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