Green boxes? An overview of climate risk tools and analytics

Paul Smith

Since the Taskforce on Climate-related Financial Disclosure (TCFD) was launched in 2017, finance sector awareness and support for forward-looking scenario analysis and risk assessment has grown exponentially. The TCFD, led by Michael Bloomberg, proposed a framework for private corporations to assess, manage and report on the climate-related risks they might face, not only in terms of the physical impacts of climate change but also from the policies to transition the global economy from high-carbon industries, as well as reputational and litigation risks associated with corporate strategy. Disclosure is a key element of this framework, as market-useful information should allow investors to identify and price-in the potential risks to firms from climate change. This “outside-in” approach to climate risks has caught the zeitgeist in the wake of the 2015 Paris Agreement, raising awareness of climate change across the private sector by focusing on potential climate-related impacts to company assets and revenue.

However, the gap between nominal support for the TCFD and actual disclosure of climate-relevant financial impacts in their 2021 consultation paper on metrics, targets and