“The worst impacts of climate change evolve over the long term, but we need decisions to be taken in the short term. So how do we bridge that gap?
A key moment in this shift happened during an A4S roundtable with Mark Carney, where we discussed the link between climate risk, financial stability and long-term thinking. Mark went on to make his famous ‘Breaking the tragedy of the horizon’ speech – I’d recommend listening if you haven’t – around the challenges of achieving a longer-term perspective. Following the roundtable he also set up the Task Force on Climate Related Financial Disclosures (TCFD), which has been an important development on the reporting front.
“All eyes are on the future. Thinking about how businesses will perform in different scenarios is key.”
We’ve seen a huge number of organisations commit to net zero and this year, in the build up to COP26, we’ll see many more. But as well as long-term targets, you need a near-term roadmap and that’s where much of the focus is at the moment. This is something we are working hard to drive – through our net zero statement of support and guidance we are helping finance teams to understand what they can be doing now.
Scenario analysis is one of the most important components. For companies, investors and regulators, thinking about how businesses will perform in different future scenarios is helping to shorten those time horizons. Science based targets are another example of how organisations can set a clear pathway to net zero emissions, with the Science Based Targets initiative helping to provide a robust approach. Both analysis and targets can combine to help businesses understand what they need to do now right now to contribute to the solution.
2030 may still seem a long way away. But in a nine year period you really can start to develop more tangible plans and strategies, and finance and accounting can start to model the different scenarios that might get you there. And, of course, this is not just about risk, it’s also about opportunity.”