Manage Climate Risk Without A Sustainability Team

According

to the United Nations Office for Disaster Risk

Reductions, there has

been a rise in climate-related disasters during the past 20 years. That said (and

the global pandemic aside), the events of 2020 alone should leave no one in any

confusion over the reality of climate-related risks:

• · 

  January 2020: Flash Floods in Indonesia kills 66

• · 

  January – March 2020: Australian bushfires kill roughly 478

• · 

  May 2020: Cyclone Amphan kills 85 people in Bangladesh

• · 

  August 2020: Hurricane Laura kills 77 in Louisiana and Texas, theDominican Republic and Haiti

• · 

  August 2020: Flash floods kill 150 in Afghanistan

• · 

  November 2020: Hurricane Eta kills 150 in Central America

• · 

  December 2020: 2020 was joint hottest year for the planet with 2016

In our

report, Climate risk: Is the financial services industry prepared?,

we explore the very real impacts that climate-related risks could have on

businesses and risk teams, including:

·       

Market risk: Natural disasters and/or climate policy changes leading to the

re-pricing of various financial instruments, including equities.

·       

Credit risk: Potential increases in defaults by businesses and households due to

extreme weather events. Climate events causing collateral depreciation.

·       

Liquidity risk: Climate-related risks adversely affecting refinancing opportunities. Greater

liquidity needed to cope with climate risks.

·       

Operational risk: Supply chain disruptions and facility closures as a result of

physical risks. Broader business resilience problems and the associated effect

on brand reputation.

Businesses

and leaders are becoming increasingly aware that climate-related risk needs to

be managed effectively to secure the future of their organisations and

industries.

Indeed,

according to Harvard Business Review, environmental,

social and governance issues (ESG), were at the top of senior executives’ priorities at over 43 global institutional investing firms, including the

world’s three biggest asset managers (BlackRock, Vanguard, and State Street). Giant

asset owners such as the California Public Employees’ Retirement System

(CalPERS), and the government pension funds of Japan, Sweden, and the

Netherlands were also concerned. What’s more, those organisations who have not adopted

adequate climate risk policies are facing pressure from other levels

on the corporate ladder, as over a third (35%) of UK businesses claim staff have left roles

because they are dissatisfied with their employer’s stance on climate-related

issues. 

 

Who has a

fully-formed climate change risk assessment framework in place?

A climate

change risk assessment framework is a formal structure that is aligned with

governance standards that identifies and evaluates potential climate-related

risks and the impact they could have on the organisation. They are typically

enacted by a climate risk team, ideally lead by a Chief Sustainability Officer

(CSO).

Apart from

Big 4 consultancies, the larger UK banks and financial services firms, research

shows that most organisations do not yet have a dedicated climate risk team or

CSO, instead preferring to deploy specialist staff within existing credit,

market, operational and liquidity risk functions.

This is

often a strategic choice, with companies recognising that climate risk affects

all areas of risk management. Some firms are also too small to warrant separate

climate risk teams, in which case the climate risk responsibility typically

falls upon the CEO or MD.

 

How to

implement climate risk management without a risk team

Regulatory

pressures mean that companies don’t have long to fully embed their climate risk

frameworks before the end of this year. Many also recognise that climate change

preparedness extends beyond their immediate regulatory obligations, however

without a dedicated risk team in place the challenge lies in being able to

properly implement changes to risk management without overloading the CEO or

MD.

One viable

option for many organisations is to explore the expertise that interim managers

bring. Contractors and other interim specialists can provide essential support whilst

organisations build towards recruiting a climate risk management team, helping businesses

deliver the necessary changes to achieve regulatory compliance and climate risk

futureproofing.

 

Building your permanent or agile climate risk management

team

Barclay Simpson is an international recruitment consultancy

that specialises in recruiting professionals for the interrelated disciplines

of Governance, namely Information/IT Security, Risk, Resilience, Audit,

Compliance, Legal and Treasury. Our risk team mirrors our clients’ needs by

dividing our expertise by discipline; Investment Risk, Operational Risk,

Liquidity Risk, Quant Risk and Credit Analytics.

When you’re looking to build and secure your organisation’s

climate risk management capability, Barclay Simpson can help you quickly build

a technically proficient multi-skilled risk management function and team either

on a permanent or contract basis.

Get in touch for support hiring climate risk professionals