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SPECIAL FEATURE: SUSTAINABILITY
HOW BOARDS CAN DRIVE MORE ROBUST CLIMATE RISK DISCLOSURES
products and services, supply chains and operations across
the organization, materially affecting operating costs and
revenues.
Review climate risks and opportunities across the
value chain
Companies should look beyond their internal operations
when assessing climate risks and opportunities. In fact, the
upstream and downstream emissions in most organizations’
value chains (Scope 3) are much higher than those from
their own operations (Scope 1 and Scope 2). Boards should
evaluate if the executive team has reviewed the value chain
holistically to identify material climate risks and opportu-
nities, and whether suppliers are actively involved in their
decarbonization process.
This won’t be a straightforward task as many businesses
currently have opaque supply chains. But with increasing
stakeholder scrutiny on value chain emissions, particularly
in carbon-intensive and consumer-facing industries, the
board needs to work with the management to actively pursue
decarbonization strategies throughout the company’s value
chain.
Analyze climate scenarios for robust risk assess-
ment
Scenario analysis is important for companies to understand
how future climate risks can potentially impact their busi-
ness and supply chain activities, and should inform risk
assessment, strategy formulation and investment decisions.
Yet, only 17.2% of the organizations in Singapore assessed in
the study are conducting scenario analysis. This is of con-
cern, given that scenario analysis is perhaps the most critical
aspect of the TCFD framework as it helps turn theories into
tangible strategies.
Boards should mandate climate-related financial disclosures
to be included in mainstream financial filings. Climate risk
information should also be included in financial statement
estimates and assumptions, including asset impairment
models or asset depreciation models. So far, companies have
had limited progress on this front.
Companies should also stress test their business models
against the different climate scenarios. Depending on the
level of climate risk disclosure, boards can then guide their
organizations to move toward operating models, revenue
streams and markets that are better positioned for a de-
carbonized economy, and wind down operations with high
climate risk exposure.
With growing political will and public opinion pressuring
businesses to tackle climate change urgently, a strong
uptick in climate-related financial disclosures looks likely.
Companies will be expected to assess and fully disclose the
physical and financial risks that climate change poses to
their assets. They will need to demonstrate a robust strategy
that protects value and makes commercial sense in a decar-
bonized economy. Boards that can guide their organizations
to respond nimbly in this way will help the business improve
its operational resilience, expand its customer base, and
maintain access to institutional capital.
Introducing Dulwich College
(Singapore)'s new
SE21 Innovation Hub
Contributed by Kai White
Manager of Sustainability and Global Citizenship at
Education in Motion (EiM), Dulwich College (Singapore)
Boards should ask the following questions:
•
•
•
•
•
What are the organization’s risks and opportunities as a
result of climate change in the short, medium and long
term?
What are the current processes used by the organization
to identify, assess and manage climate-related risks and
to what extent are these processes integrated into the
company’s risk management framework?
What are the top emission reduction levers in the com-
pany’s value chain and how can the business work with
its supply chain partners more closely to involve them in
its decarbonization journey?
What internal governance structures are in place to fos-
ter deeper engagement with the senior management on
climate-related issues?
Are the organization’s disclosures robust enough to
address the needs of stakeholders and provide “deci-
sion-useful”, forward-looking information?
ABOUT THE AUTHOR ABOUT THE COMPANY
Simon is EY Asean Climate Change and Sustainability Services Leader
and an Assurance Partner at Ernst & Young LLP in Singapore. He
helps to manage sustainability advisory services for key SGX-listed
companies across diverse industries, MNCs as well as companies in
the public sector. His transaction advisory experience includes due
diligence as well as business valuations for M&As and divestments in
Southeast Asia. Simon is a fellow member of Institute of Singapore
Chartered Accountants and CPA Australia. He holds a Bachelor of
Accountancy from National University of Singapore. EY exists to build a better working world, helping create long-term
value for clients, people and society and build trust in the capital
markets. Enabled by data and technology, diverse EY teams in over
150 countries provide trust through assurance and help clients grow,
transform and operate. Working across assurance, consulting, law,
strategy, tax and transactions, EY teams ask better questions to find
new answers for the complex issues facing our world today. Find out
more at www.ey.com.
SPECIAL FEATURE: SUSTAINABILITY
INTRODUCING DULWICH COLLEGE (SINGAPORE)'S NEW SE21 INNOVATION HUB