By Tamara O’Brien, TMIL’s roving reporter

We’re all risk experts now, aren’t we? The mere act of crossing someone else’s threshold is hedged with uncertainty. For example, this weekend I’m visiting my daughter, who lives a few hours away. Another housemate’s mum who visited recently has just tested positive for Covid. All the residents have tested negative, though the housemate concerned is doing the right thing and isolating. Working out what this would mean for my own visit was anything but straightforward, and the official guidance wasn’t much help. In the end, as one rather discussion-weary daughter put it, risk is how you feel after you’ve weighed everything up.

In other words, when it comes to risk, context is all. And this principle was at the heart of today’s webinar – along with the reminder that, despite the enormity of climate risk, there is opportunity in climate change as well.

With our august panel of climate, sustainability and reporting experts, the arguments were informed and nuanced, bringing in the blizzard of codes, organisations, acronyms and initiatives that accompanies any discussion of environmental, social and governance (ESG) issues. The main one on the agenda today, though, was TCFD, the Task Force on Climate-related Financial Disclosures – so here’s a mini reminder of what it’s all about:

TCFD is a set of disclosure obligations governing how companies report on the financial implications of climate-related risks and opportunities.
The idea is to have consistent, comparable metrics in this highly technical area, so that investors, insurers and other stakeholders can get a truer picture of a company’s sustainability; and companies themselves can better understand and manage their climate-related risks and opportunities.
TCFD is now mandatory for UK premium-listed companies (as of 2021/2022 reporting season).

The unbearable unsustainability of climate change

Back to our panel. Jeremy Osborn, Director of Business Relationships & Networks at the Value Reporting Foundation, stressed the importance of context when talking about climate change. Company performance should be assessed in terms of its sustainability, with climate change the most pressing issue, which of course has financial consequences. For real-life examples, look no further than the current 50°C heatwaves in Canada and Pakistan. As Jeremy put it, ‘Life is almost unsustainable in these conditions. Climate change is not an empty phrase.’

He advised finance professionals in the audience to pay special attention to the launch of the IFRS’s (International Financial Reporting Standards Foundation) Sustainability Standards Board to coincide with the COP 26 climate negotiations in November. This will take a ‘buildings blocks’ approach to international sustainability standards, with climate change the focus of the first, drawing on the work of the so-called Group of Five's prototype climate-related financial disclosure.

Tim Mohin is EVP and Chief Sustainability Officer at software company Persefoni in the US, which helps companies measure and manage their carbon footprint. He observed that if Europe moves its CSRD (Corporate Sustainability Reporting Directive) forward, as looks likely, it will further muddy the non-financial-reporting waters. Time for political leadership, he said, to end the confusion as we move towards a low-carbon economy.

All our panellists pointed to the different sets of disclosure standards in Europe, the US and internationally as a barrier to achieving climate goals, and emphasised the urgent need for a global ‘common way’. Oh the irony: that the biggest obstacle to companies reporting helpfully on their carbon emissions should be the surfeit of regulation demanding that they do so. But a similarly difficult challenge, echoed by the panellists, is how to measure emissions at all. There were no easy answers, but understanding your own business and its impacts, and getting a reliable system of measurement have to be the starting point.

Bringing us literally to the coalface of climate risk – and opportunity – Annie Heaton, Head of Sustainability Dialogue and Disclosure at ArcelorMittal, told us about the steel giant’s journey in a decarbonising world.

‘We used to be the largest steel company; now we seek to be the leading company, and our decarbonisation efforts are a key part of that. TCFD reporting is about more than risk, it's about how your business will fare in a climate-conscious world. What will the steelmaking sector as a whole look like in 20 years’ time? The transformation of technology, the energy sources and raw materials we use, the new skills required – all these things need policy framework changes, with huge impacts on both ourselves and society. And so they are intrinsically uncertain.

‘This takes me back to the point Jeremy made about the importance of context and narrative: if risk is uncertain and opportunities are unfolding, we need to stand back and give investors and stakeholders a framework for how they might look at a company’s prospects, in terms of both the financial risks and the future impacts of the company on society. That's why we decided to publish a focused Climate Action Report in 2019 – and we’ll do it again this year, because the context is changing so rapidly. Investors want to understand our strategy for responding to this ever-evolving context, and our stakeholders want the certainty that we’re committed to it.’

And here’s the thing. The UK, and ArcelorMittal itself, has committed to achieving net zero by 2050, in line with the Paris Agreement. Think of the jobs, and the amount of steel needed for technologies that enable those CO2 emissions reductions – the wind turbines, the hydrogen electrolysers, the low carbon transport ... yes there’s risk and uncertainty, but also enormous opportunity.

A fond farewell… for now

Energised by the discussion, the webinar audience brought up some excellent questions with just a minute to go, and, thanks to the generosity of our panellists, we ran over time – and after all, this was the last in the year’s series of webinars, so an extra 10 minutes could be justified.

But don’t worry – series 2 (quarterly this time) will kick off in October, when the book that started it all, Trust me, I’m listed, gets its second edition. It will have significant updates on two key issues: ESG reporting, and reporting’s digital future. Essential reading for anyone in the reporting world.

As for me, it’s midsummer in England, so rain and thunderstorms are forecast for my first weekend away in 18 months. At least some things don’t change.