Materiality of Climate Change

As climate takes its tool on governments, states and corporations, financial players are demanding better information reflecting the ways in which such affectations are to materialize. Policy, regulatory and judicial pressures demanding climate considerations be taken into account are also increasing, requiring companies thoroughly assess and foresee the consequences regarding impact and exposure that climate change might have on their standing.

 

According to the CSR-Directive, so-called non-financial statements became a statutory duty for certain large, publicly traded companies as well as certain insurance companies and financial institutions across Europe. Reporting on financial years beginning on or after January 1, 2017, require disclosure on non-financial issues in the area of Corporate Social Responsibility ("CSR"), including environmental aspects such as the impact and exposure to and from climate change, should these have material implications for the company. The non-financial statement is subject to a materiality requirement: Only those risks that are very likely to have or will have a serious negative impact on environmental aspects of the reporting company shall be disclosed. For this purpose, determining if climate is a material issue for companies is a first step.

 

right. based on science (“right.”) as part of Task Force III “ESG Data” of the Sustainable Finance Cluster (former Accelerating Sustainable Finance Initiative) lead by Green Finance Cluster Frankfurt of the Ministry of Economic Affairs for Hesse and Deutsche Börse Group, analysed the challenges faced by incorporating and working with Environment Social Governance (“ESG”) data, specifically in response to the materiality of climate change.

 

"I agree with your conclusion that there is a risk when the reporting entity does not understand the link between its legal obligations,

that is, the liability of the organization, and the affect that climate change has on these obligations, or as you say, not understanding

the link between a certain footprint and the financial, legal or physical risks the emissions information might entail."

 Mark Baker-Jones, former Partner at DibbsBarker (Australia)

 

Mark Baker-Jones is leading the climate change adaptation team and now General Counsel and Company Secretary at CDP Waste2Energy Holdings Pty Ltd on our Materiality Report. What type of information should be disclosed when providing climate related Information? Considering that concepts must be understood in the light of new circumstances (being one of the main functions of legal interpretation) leads us to understand how issues, which were not material at a certain point in the past, might be regarded as material now. In our “Materiality Report” right. gives you the solid background on existing concepts of materiality.

Policy and Regulation on Climate Disclosure

Main objectives of the action plan on sustainable finance adopted by the European Commission in March 2018 (“EU Action Plan”) based on recommendations of the High Level Expert Group on Sustainable Finance (“HLEG”) are:

  • Reorienting capital flows towards sustainable investments
  • Mainstreaming sustainability into risk management
  • Fostering transparency and long-termism

These objectives have found and are in the process of finding their way into existing regulation: e.g. of which can be found in the CSR Directive and Pension Providers Directive (“IORP”). For the purpose of understanding the pressure for disclosure of climate related information, we have analysed these directives and hereby provide you with an overview:

CSR  | Corporate XDC

How do we turn climate-related risks into a central business opportunity - or at least fulfil existing legal requirements? According to the CSR Directive a company is expected to disclose relevant information on the actual and potential impacts of its operations on the environment including climate, and on how current and foreseeable environmental matters may affect the company's development, performance or position:

IORP  |  Financial XDC

How hot is your portfolio - by how much would the earth warm by 2050 if everyone invested like you? The SRD requires institutional investors and asset managers to design engagement policies that would encourage long-term shareholder engagement and enhance transparency amongst companies and investors:

 

 


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right.now informs you about climate change adaption with a focus on climate-related legal risks

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