Alliance Advisors Issues White Paper on Climate Disclosure and Analysis for Corporations

Investors Want More, Better Information

London, United Kingdom–(Newsfile Corp. – July 17, 2023) – Global investors recognize the investment risks and opportunities associated with climate change, and as a result, are seeking out more consistent, comparable, accurate, and high-quality information from companies about their exposure to and preparedness for climate-related impacts, according to a new white paper by Emmanuelle Palikuca titled: The Role of Climate Disclosure and Scenario Analyses for Companies, which is now available on the Alliance Advisors website: https://allianceadvisors.com/from-risk-to-resilience-the-role-of-climate-disclosure-and-scenario-analyses-for-companies.

Alliance Advisors is a global corporate advisory and shareholder advisory firm serving more than 1,000 clients.

In this research, done in collaboration with Steve Smykal, the founder and president of 1 World Sustainability, a U.S.-based consulting firm specializing in climate risk management and sustainability strategy, Palikuca and Smykal discuss the specifics of investor voting policies, engagement priorities, and emerging disclosure regulation around the globe.

Government regulation is driving climate action and corporate disclosures, as part of the ESG movement. There is a growing recognition of the financial risks and opportunities associated with sustainability. As recognition of the financial risks and opportunities of the impact associated with sustainability continues to evolve, there will be a tightening of ESG disclosures across the board to promote more standardized, widespread, and consistent access to climate related information, predicts Palikuca and Smykal, whose paper includes a snapshot of climate disclosure rules from six major global economies, including the USA, the EU and Hong Kong. Nearly all the emerging regulations are informed by the same source – the TCFD framework (Task Force on Climate-related Financial Disclosures.)

With investors’ focus on transition planning, climate scenario analyses play a key role in many of these regulations, notes Palikuca and Smykal.

Enhanced Risk Management

Climate reporting and disclosures can help companies identify and manage climate-related risks, such as extreme weather events, supply chain exposure, and regulatory changes. Each company has their own unique physical, transition, and liability risks that are becoming more prevalent, writes Palikuca and Smykal.

• Physical Risk: 92% of the S&P 1200 will have at least one asset highly exposed to physical risks by the year 2050 under a high emissions scenario.

• Transition Risk: Carbon economies could see a loss of $1.4 trillion in stranded fossil fuel assets.

• Liability Risk: Several investigations and multi-million-dollar fines regarding ESG and greenwashing around the world have materialized in the last 18 months

By understanding and managing these risks, companies can avoid costly losses and improve their long-term resilience.

Climate-Related Shareholder Proposals

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The 2022 proxy season saw record high numbers of environmental shareholder proposals, but declining levels of support from shareholders, says Palikuca.

“During the first half of 2023, we have seen this trend continue with lower support from investors across environmental proposals. Many of the climate-related shareholder proposals that have gone to a vote have fallen short of reaching a majority, receiving about 30-40% support,” she writes.

This shift is primarily due to shareholders applying greater scrutiny to the purpose or scope of proposals. Many institutional investors have introduced new engagement or stewardship policies and goals that outline their expectations for corporate climate disclosure and progress.

Although the policies vary, notes Palikuca and Smykal, they share a common need to identify climate risks and opportunities and their impact on the business, which can be done through a climate scenario analysis.

“In some cases, these proposals have failed even with proxy advisory firms such as Institutional Shareholder Services (ISS) and Glass Lewis recommending in favor of the proponent as shareholders apply greater scrutiny to the purpose or scope of proposals,” notes Palikuca, who prior to joining Alliance, was a Group Manager on the Sustainability Advisory team at ISS Corporate Solutions (ICS).

MEASURING PROGRESS

“Institutional Investors ultimately want to see and measure companies’ progress, so it is crucial that companies demonstrate they are moving in the right direction and will continue to evolve their approach over time,” writes Palikuca and Smykal.

Enhancing climate-related disclosure not only enables companies to comply with emerging regulations, but it can also enable companies to manage risks, unlock value, strengthen its reputation, and attract new capital, she adds.

“Inevitably, however, climate action warrants long-term planning, and while there is a lot expected of corporates around climate strategy and disclosure — the most important step is to get started, ” says Palikuca and Smykal.

5 Steps to Build Your Climate Strategy

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To begin tackling climate change and disclosure requirements, companies can focus on a few key areas. For companies that are unsure of how to begin building their climate-related disclosure, Palikuca and Smykal recommend five steps for companies to get started.

• Understand Climate related Requirements and Expectations

• Conduct a Climate Scenario Analysis

• Establish Governance and Oversight of Climate Risks

• Enhance Climate Disclosure in Line with TCFD Recommendations

• Engage Your Stakeholders

Even as companies transition toward net-zero emissions and mitigate their contributions to climate change, they will not be insulated from the global impacts of climate change. Conducting ongoing climate scenario analyses enable companies to continue monitoring the potential risks and opportunities their business and operations may face under a changing climate, says Palikuca and Smykal.

For more information, go to www.AllianceAdvisors.com.

Media Contact: Emmanuelle Palikuca: epalikuca@allianceadvisors.com

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/173701