Thank you for joining Chapter Zero during 2019 and supporting our efforts to help this community of chairs and non-executive directors across all sectors prepare to address the risks and opportunities presented by climate change and the transition to a low carbon economy. By joining you have shown your awareness that business has a major role to play as the UK and a number of other governments implement the actions needed to meet a target of net zero greenhouse gas emissions by 2050.
Since our launch in late June 2019, we have built a membership of more than 400. We need your help to reach our target of 1,000 members (which would be two members on each UK listed company board) by next year’s UN climate change conference (COP26) in Glasgow in November when the UK Government intends to showcases its leadership in climate action and innovation.
Please share this link with other non-executive directors that may benefit from membership.
This is Chapter Zero’s fifth and final Bulletin of 2019, our inaugural year, and we and our partners have reflected on some of the highlights of the last 12 months on the climate change agenda:
- The Committee on Climate Change (“CCC”) set out its recommendation of new emissions targets for the UK in its CCC Net Zero report, May 2019: net-zero greenhouse gases by 2050. The CCC concluded that net-zero is necessary, feasible and cost-effective.
- In June 2019, the UK became the first major economy in the world to pass laws to end its contribution to global warming by 2050. The UK had already reduced emissions by 42% since 1990, while growing the economy by 72%.
- In the Green finance strategy released in July 2019, the UK Government set out its expectation for all listed companies and large asset owners to disclose their climate change risks in line with the recommendations of the Taskforce on Climate Related Financial Disclosures (TCFD) by 2022.
- During November 2019, the CBI low carbon 2020s report was released, setting out policy recommendations to Government, focused on the sectors that are key to the UK’s domestic net-zero ambitions. How is your sector affected?
- Investors focused strongly on the carbon impacts of their portfolios and action their investee companies were taking to tackle them, and to adapt to climate change impacts. Sarasin & Partners, for example, will be writing to individual company audit committee chairs and lead audit partners over coming weeks setting out the expectations for 2019 annual reports and accounts and asking for assumptions to be stress-tested so that investors can see how resilient companies are to governments’ policies that align with the Paris Agreement commitments (made in 2015 at the UN climate change conference in Paris to limit the global temperature rise to well below 2 degrees above pre-industrial levels and to aim for 1.5 degrees).
- In December the Bank of England published a discussion paper setting out its proposal for the 2021 Climate Stress Test. It will build upon the PRA’s supervisory expectations for managing climate risks, published in April, and the 2019 Insurance Stress Test. The objective of the exercise is to test the resilience of the current business models of the largest banks, insurers and the financial system to the physical and transition risks from climate change.
- The RE100 now has 220 companies committed to go ‘100% renewable’ and the International Renewable Energy Agency, reported that costs from all commercially available renewable power generation technologies has declined. Within IRENA’s global database, over three-quarters of the onshore wind and four-fifths of the utility-scale solar project capacity due to be commissioned in 2020 should provide lower-priced electricity than the cheapest new coal-fired, oil or natural gas option, the report notes.
- Under a “business-as-usual” emissions scenario, the US will lose 10.5% of its GDP, Japan, India and New Zealand will lose 10%, Switzerland will be down 12%, Russia 9% and the UK down by 4%. Adaptation can provide a triple dividend: it avoids economic losses, brings positive gains, and delivers additional social and environmental benefits. The Global Commission on Adaptation shows how investing in adaptation, and in the innovation that comes with it, can unlock new opportunities and spur change across the globe.
- Further climate policy is expected from governments in the New Year and ahead of COP26. However, in the meanwhile Principles for Responsible Investment has released a forecast of an Inevitable Policy Response with a view on pricing-in the likely near-term policy response to climate change. The analysis shows that these critical policies could permanently wipe up to 4.5 percent or $2.3tn off the valuation of a range of companies in the MSCI ACWI index.
Events in early 2020
Check your diaries for the Chapter Zero events in the new year. See events page or bulletin.
In the UK non-executive directors and chairs are encouraged to register as members to receive the monthly bulletin which provides details of the events available. Many of our events are private and are not included on our website. If you are only visiting the UK and looking to join our events, please email us for the 2020 events brochure.
Resources available to you
ICAEW On-demand webinar: Is Climate on Board?
The ICAEW’s recent survey of UK business members (Jun/July 2019) revealed only 37% were aware of the World Economic Forum’s Climate Governance Principles and only 15% were aware of the FSB’s Taskforce on Climate Related Financial Disclosures. How ready is your board to talk about climate change? Listen to Julie Baddeley, Chair Steering Group, Chapter Zero in conversation with Andrew Ratcliffe, Past President and Chair of ICAEW’s Sustainability Committee. In this 40-minute webinar you will gain an increased understanding of how climate change is an issue for boards and what to do about it. ‘Is Climate on Board’ Webinar (Recorded 11 November 2019)
A closer look at Climate Change
A publication by Deloitte for Those Charged With Governance
Investors, regulators and other business stakeholders are increasingly demanding better disclosures on climate change matters and challenging companies that are not factoring the effects of climate change into their critical accounting judgements.
Revenues, costs and asset lives could be impacted, and companies will need to reassess their future cash flow forecasts and related management judgements relating to impairment, asset retirement obligations, provisions, going concern and viability statements. Access the publication here.
Chapter Zero relationships
Through our partners the Hughes Hall Centre for Climate Change Engagement we are closely affiliated to Cambridge Zero which launched at the end of November, here is a link to a recording from David Attenborough speaking about the climate crisis and his hopes for the future. Cambridge Zero has hugely ambitious plans; to lead the world in tackling climate change through research, innovation, education and outreach.
Recap on the latest climate conference in Madrid (COP25)
Europe’s Green Deal
The European Green Deal was formally unveiled on 11 December, outlining a comprehensive climate and nature package of measures to make Europe climate neutral by 2050. Headline targets listed in the Green Deal include a 50-55% emissions reduction target for 2030; a climate law to reach net-zero emissions by 2050; a transition fund worth €100bn and a series of new sector policies to ensure all industries are able to decarbonise.
Paris Agreement off-track
The Climate Action Tracker’s 2019 annual update has suggested that if every nation met their Paris Agreement pledge, it would still lead to warming of 2.8C by the end of the century.
Echoing the findings of the Climate Action Tracker is a report from Boston Consulting Group and the World Economic Forum, which shows the lack of progress on global climate action. At a business level, the report claims that of the 7,000 corporations worldwide that actually report to CDP, only one in eight disclose their emissions fully and have a public target in place and are actively reducing year-on-year emissions.
Happy Holidays (and some homework)
If you haven’t already done so (while you’re enjoying some free time during the holidays), download our toolkit and assess your board’s readiness to deal with the impacts of climate change and help inform your approach to long term strategic planning and risk assessment.
The toolkit is in two parts: an overview and an assessment tool. The assessment tool is designed so that you can complete it yourself, with or without a facilitator. The toolkit we enable you to:
- deepen your understanding of the climate change challenge as it affects your companies
- identify those areas where your organisations are leading, lagging or somewhere in between
- engage effectively with fellow directors, on the risks and opportunities
- explore strategic options related to the climate transition of your companies.