ERM publishes paper on Climate change risk: the new investment fundamental
01 March 2018
A new survey by ERM has revealed that few companies are aligned to bridge the gap between sustainability and finance functions in addressing climate risk.
Until recently, most companies have thought of climate risk as a concern for governments and NGOs to worry about – but not anymore. Through global political action, regional legislation, technology breakthrough and market disruption, extreme weather events, investor priorities and consumer sentiment, it is becoming apparent that climate risk is now an investment fundamental that directly impacts all of business.
ERM constructed a survey for 120 Chief Financial Officers (CFOs) and Chief Sustainability Officers (CSOs) with a working hypothesis that there might be a disconnect in understanding and subsequent strategy between the CFO and CSO regarding the management of the carbon reduction agenda in an organization.
Through the survey we found that while mainstream investors have ramped up pressure on companies to disclose in financial terms the business risks associated with climate change and while most companies see the need to develop climate change strategies, we found that the finance function sees managing climate change risk as less of a priority relative to sustainability heads and there is a gap in prioritisation and hence management of climate-related risk between finance and sustainability executives.
To be successful, sustainability, core functions and finance professionals need to work together to understand, quantify, measure and report on the current and anticipated organizational and financial risks and opportunities arising from climate change, and this disconnect could impact an organization’s preparedness for change.
ERM’s paper, part of ERM’s series on Bridging the Gap between Sustainability and Finance, examines the survey responses and findings in depth and outlines the path forward for companies to address these issues.
Learn more about ERM’s paper Climate change risk: the new investment fundamental