FOR THE first time, the Institute of Risk Management (IRM) has published a guidance report for practising risk managers which is wholly focused on climate change. This marks an important formal recognition of the importance of Environmental, Social and Governance (ESG) issues for global business and, indeed, the pivotal role that risk managers will undertake in helping to address the climate crisis.
Through collaboration with a range of stakeholders, risk managers will need to play an increasing role in supporting organisations in identifying, assessing and managing their climate-related risks and opportunities and integrating them within existing enterprise risk management frameworks.
ESG factors are rapidly becoming the single most important business driver of the decade. That being so, organisations around the globe need to act quickly to make sure reporting processes are in place so that they can measure progress. It’s crucial that companies’ and Governments’ progress towards halving greenhouse gas emissions by 2030 and reaching net zero by 2050 are measured with a high degree of accuracy.
With this in mind, the IRM’s Climate Change Special Interest Group has developed a new framework and guidance document which will help organisations to build their capabilities and assist in making sense of the complex climate changes forcing and driving transformational alterations across economies, industries and society at large.
Although this guide focuses on climate change, the IRM urges it’s important to understand the relationship and relevance of this document to the wider ESG issues set to become increasingly prominent features of financial regulation and supervision globally as time progresses.
Martin Massey MIRM, chair of the IRM’s Climate Change Special Interest Group and contributing author for the new document, explained: “We have identified seven key areas that require attention to enable the development and execution of a climate change risk management strategy in any organisation. Each area of focus has been used as a key section within the guide.”
Continuing this theme, Massey noted: “We start by identifying the key risks and opportunities being driven by, or that are otherwise associated with, the climate change risk landscape. We cover physical, transition and liability risks as well as the development of a risk taxonomy and a ‘risk radar’. Further sections will be published in due course. I would like to formally thank the other contributing authors and Special Interest Group members, namely Bogdan Pletea IRMCert, Darren Munday CFIRM and Iain Felstead.”
Carol Misiko CFIRM, senior IRM member (and secretary to the IRM Regional Kenyan Group) is also an Advisory Board member for the World Economic Forum’s Global Risk Report. Misiko stated: “In recent years, the World Economic Forum’s top risks have been dominated by environmental concerns. In the survey for the 2020 report, climate change counted for three of the five main global risks. Extreme weather events, the failure of climate change mitigation and adaptation and biodiversity loss and ecosystem collapse were all part of the mix.”
Misiko added: “Organisations must address a growing number of critical drivers of change and expectations, including new international and national legislation and regulation and the voluntary disclosure approach led by the Task Force for Climate-Related Disclosures. Other major drivers include increasing public concerns and pressure from lobby groups, activists, regulators and investors. This new document is a great resource for risk managers.”
*The IRM would like to thank Milliman for sponsoring the publication and Commercial Risk for serving as Official Media Partner
**Download the new guidance document at https://www.theirm.org/what-we-say/thought-leadership/climate-change-risk-management-guidance/
***The IRM and Imperial College London have teamed up to deliver a practical training course on ‘Climate Change Risk Management’. Building on world-leading expertise in the science of climate change, business management and enterprise risk management, this practical course not only allows learners to explore why managing climate change risk is important to their organisation, but also find out how to do it. The next course will run on 8-9 December. Further detail is accessible online at https://www.theirm.org/training/public-courses/climate-change-risk-management/