How Climate Scenarios Can Save your Business

Growing Demand By Investors and Regulators for Climate Stress Testing and Scenarios

Investors and shareholders are demanding a greater focus by companies to assess their climate risk. Phillips 66 was the most recent major announcement where shareholders voted to have the company consider is climate risk along the Texas Gulf Coast. A specific emphasis was given to public health impacts that may occur due to chemical releases brought on by storm surge, flooding, and hurricanes.

The wave is coming for greater climate risk transparency. As I have written before there is global activity among regulators, investors, and asset managers demanding greater transparency regarding climate risk. Further, ongoing discussions are happening at the US Fed and the Commodity Futures Trading Commission’s (CFTC) Market Risk Advisory Committee (MRAC). The MRAC has recently closed public comment for the Climate-Related Market Risk subcommittee specific to figuring out how to assess and disclose climate risk. It is growing ever more necessary that a company is prepared to comply with forthcoming disclosure mandates.

Conducting scenario analysis to determine plausible future pathways and disclosing the outcomes does four things:

• Indicates that management has a…