47 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