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12 April 2021

Climate change risk and liability report 2021

12 April 2021 Climate Change Risk Practice

Introduction

We are pleased to present our latest climate change risk and liability report, Stepping up good governance to seize opportunities and reduce exposure.

Download the full report

Much has changed since we published our first climate risk report two years ago, at a time when it was still a relatively nascent boardroom issue for businesses outside the energy sector. The countdown to net zero carbon emissions has now truly begun and developments around climate change risk and regulation are accelerating, with implications for all industries.

The 26th UN Climate Change Conference of the Parties (COP26) in Glasgow in November this year is likely to set the pace in terms of defining and strengthening the policy response. Since achieving net zero will require significant investment as well as regulation, this could create major opportunities for businesses, as well as risks.

As companies build resilience, the importance of good governance cannot be overestimated. Putting climate risk awareness at the heart of decision-making and embedding it into both strategy and culture at all levels of an organisation is an important step.

Since legal considerations extend beyond environmental law and regulation to areas like asset management, finance, insurance, tax and many more, businesses are looking to their lawyers for deep knowledge of all the issues and out-of-the-box thinking to guide them through the transition.

At Clyde & Co, we have developed market-leading expertise and a reputation for innovation in this space. In this report, we look at many of the key issues, from recent and emerging developments in this area, to how organisations can best position themselves to withstand shocks and seize the initiative so that they can help to deliver a future that is sustainable for themselves, and for all of us.

 

About the report

Produced

12 April 2021

Location:

Africa, Americas, Asia Pacific, Middle East, UK & Europe

Written by:

Emma Ager

Emma Ager

Partner

Neil Beresford

Neil Beresford

Partner

Nigel Brook

Nigel Brook

Partner

Laura  Cooke

Laura Cooke

Partner

James  Cooper

James Cooper

Partner

Richard Elks

Richard Elks

Partner

Liz Jenkins

Liz Jenkins

Partner

Simon Konsta

Simon Konsta

Partner

Paul Lowrie

Paul Lowrie

Partner

Mary Anne Roff

Mary Anne Roff

Partner

Dr. Henning Schaloske

Dr. Henning Schaloske

Partner

Vikram Sidhu

Vikram Sidhu

Partner

Jacinta Studdert

Jacinta Studdert

Partner

Lucia Williams

Lucia Williams

Associate

Read time

4 mins

Themes

Resilience

Download
About the report

Produced

12 April 2021

Location:

Africa, Americas, Asia Pacific, Middle East, UK & Europe

Written by:

Emma Ager

Emma Ager

Partner

Neil Beresford

Neil Beresford

Partner

Nigel Brook

Nigel Brook

Partner

Laura  Cooke

Laura Cooke

Partner

James  Cooper

James Cooper

Partner

Richard Elks

Richard Elks

Partner

Liz Jenkins

Liz Jenkins

Partner

Simon Konsta

Simon Konsta

Partner

Paul Lowrie

Paul Lowrie

Partner

Mary Anne Roff

Mary Anne Roff

Partner

Dr. Henning Schaloske

Dr. Henning Schaloske

Partner

Vikram Sidhu

Vikram Sidhu

Partner

Jacinta Studdert

Jacinta Studdert

Partner

Lucia Williams

Lucia Williams

Associate

Read time

4

Themes

Resilience

Download

“Climate change is a system-wide problem that needs a system-wide response. The best way to manage the risks is to work together. It’s in everyone’s interests to be part of the solution.”

Nigel Brook, Partner, Clyde & Co

TEST COVID-19 and the risk landscape

The report considers how the COVID-19 crisis has prepared policymakers, companies, and individuals for the climate change transition.

Managing COVID-19 may have given businesses a playbook for how to deal with fast-moving challenges or created a sense that major enterprise-wide risks that were previously thought too big or too difficult to deal with can now be addressed.

After years of discussions, organisations should be prepared for the international response to the climate “emergency” to develop more rapidly now, too.

The journey to net zero has only just begun (emissions were still rising until the pandemic hit), and there is still extensive scope to make changes that could contribute significantly to decarbonisation.

The report explores many of the key risks climate change poses to businesses, specifically the physical, transition, and litigation risks.

“New regulations around climate change and a sense that the pandemic has created a window of opportunity for change is galvanising activists, pressure groups and politicians alike.”

James Cooper, Partner, Clyde & Co

TEST Reporting requirements

What do businesses need to know?

Standardised reporting is generally seen as a positive move to create an established framework for climate-related disclosures. The Task Force on Climate-related Financial Disclosures (TCFD) framework is fast becoming the globally accepted standard for reporting on climate-related risks, and stakeholders are increasingly pressing companies to adopt the standard.

However, standardised reporting is not a panacea for businesses looking for absolute clarity on their climate change reporting obligations.

The report considers the pros and cons of standardised reporting and provides an overview of what businesses need to know.

“The TCFD’s focus on disclosures is welcome but reporting is only part of the story: it’s governance that dictates what actions underpin those disclosures. Good governance formulates business processes that create value.”

Richard Elks, Partner, Clyde & Co

TEST Good governance and insurance implications

How can good governance help address climate risk?

While good governance has always underpinned company performance, the pervasive and unpredictable nature of climate change risks, the more onerous reporting obligations and the complexity and long-term horizon of these issues make it more important than ever.

The report considers the importance of good governance and of pushing climate change up the board agenda.

In energy transition terms, as oil majors increasingly invest in renewable technologies, insurers too have been moving into the renewables market, by acquiring specialist practices or upskilling underwriters.

The report also considers the latest trends developing in the insurance industry as a result of climate change and the move to net zero.

“Currently, most of the drivers for change are non-litigious – it’s more about government policy, shareholder and interest group pressures and access to investment. While underwriters in some business lines are really starting to focus on climate risks and issues, this will become more widespread, particularly if we start to see significant tangible losses.”

Laura Cooke, Partner, Clyde & Co

End

2021 will see re/insurers getting back to nature