The Time is Now: Confronting a Changing Global Regulatory Landscape Using Climate Risk Data
In 2023, pressure from regulators, investors, and the public will build momentum for climate risk disclosure. Data and models exist today to help make organizations climate ready.
by Megan Arnold and Elisa Seith
The proliferation of new regulations that mandate transition and physical climate risk assessment and reporting, and greater business resiliency, will continue worldwide in the new year. Pressure from both top-down and grassroots channels for sustainable investment and operations will intensify in 2023. Impacts will be felt across publicly traded companies, multinational entities, and regulated industries.
Regardless of the velocity of regulatory change within their jurisdictions of greatest concern, Jupiter strongly urges that companies get started now on their climate-resiliency journey—before regulators compel them to do so. Respondents will be best served by getting ahead of the curve in several ways: (1) by collecting climate vulnerability data on their own assets and those of suppliers and distributors; (2) by beginning risk assessments, procuring the data they need to support those assessments; and (3) by identifying challenges and priorities to address in the next iteration.
This changing global environment, and what you can do now to prepare your organization for it, are discussed in Jupiter's on-demand webinar, “Is Your Business Ready for Climate Risk Regulation.” View it on-demand by clicking here.
An Ongoing Surge in Risk Assessment and Disclosure
The new year’s regulatory momentum will follow an eventful 2022. Voluntary disclosure of climate risk vulnerability began in Australia, Brazil, Hong Kong, and Japan. In the UK, the Financial Conduct Authority’s requirement compelling premium-listed companies to disclose alignment with the TCFD (Task force on Climate-related Financial Disclosures) framework in their 2021 annual financial reports took effect. Egypt implemented TCFD-based disclosure in 2022 as well.
In the United States, the Securities & Exchange Commission began the process of developing regulations for the reporting of transition and physical risk, revealing its initial draft on March 21. The end-of-year deadline for publishing the rules was delayed by technical glitches and the November midterm elections may signal at least two years of Congressional attempts to weaken or thwart the SEC’s initiative. Still, even a diluted form of the SEC’s proposal, in which regulations would likely still align with the TCFD framework, will add impetus to the global disclosure movement.
In the banking sector, the U.S. Federal Reserve published draft guidance to the largest institutions on “safe and sound management of exposures to climate-related financial risks” in early December and invited public comment on it. The Fed’s guidance is designed for consistency with draft principles issued by the Office of the Comptroller of the Currency (November 2021) and the Federal Deposit Insurance Corporation. (March 2022).
The European Central Bank (ECB) reviewed 186 banks for the maturity of their climate and environmental disclosure practice. ECB found that “Virtually all the institutions need to make far-reaching and enduring efforts to develop consequential, granular and forward-looking approaches to manage C&E [climate-related and environmental] risks.” In response, the ECB established “remediation timelines”— a set of staggered deadlines for subsets of disclosure content—to enable the banks to progressively meet the full supervisory expectations by the end of 2024.
Then the last day of 2022 served as the deadline for reporting climate change mitigation and adaptation assessments and measures under Phase 1 of the EU Taxonomy, an endeavor that affects all large companies, and those in regulated markets, in the European Union.
New Year Brings New Push for Assessment and Disclosure
Both 2023 and 2024 promise to be as momentous—if not more—than 2022. While it noted overall progress in the disclosure of climate-related financial information in its most recent status report, the TCFD calls for “more urgent progress … to improve transparency, especially when considering the broader global focus on climate change.” Potential frameworks for climate risk disclosure will take their place alongside the TCFD, including those from the International Sustainability Standards Board (ISSB) and Green Taxonomies.
We can also anticipate that shareholders and engaged citizenry will continue to hold regulators’ feet to the fire, encouraging them to take actions in support of sustainable investment and financial and operational resiliency.
In addition to continuing the regulatory policies established in 2022, and expanding the number of companies impacted by them, the major initiatives that we expect in 2023 and 2024 are:
- Mandatory reporting aligned with the TCFD framework for Fiscal 2023 in New Zealand and Singapore.
- Formalization of TCFD-aligned reporting rules by Canada’s Office of the Superintendent of Financial Institutions (OSFI) and the Canadian Securities Administrators (CSA).
- Expanding the pool of companies that will be required to assess and disclose climate risk in Egypt, the European Union, and the United Kingdom.
- Pilot climate scenario analysis, authorized by the Federal Reserve, for the six largest banks in the United States.
- Mandatory reporting aligned with the TCFD framework for Fiscal 2024 in Switzerland.
- The U.S. Securities & Exchange Commission expected to require TCFD-aligned reporting for Fiscal 2024.
- Potential disclosure regulation formulation in Chile, India, Malaysia, and Thailand.
Start Now, Start Right
Best-in-science physical climate impact analysis helps organizations begin the disclosure process now.
As we noted in Jupiter’s recent video series on the EU Taxonomy, “Compulsory disclosure is part of a business-critical climate journey. If you’re concerned that climate risk will affect your operations, supply chains, and balance sheets, you need to know how, and plan mitigation measures. Ultimately, you’ll want to integrate climate data into ERM processes and other decision-making tools.”
Decision-useful, best-in-science climate risk data from Jupiter is available today; it enables you to comply with emerging regulations, make your business more climate-resilient, gain advantage, and successfully launch your climate journey.
View the Jupiter on-demand webinar "Is Your Business Ready for Climate Risk Regulation." Or talk to a Jupiter expert about how to use our data and services for regulatory disclosure, risk management, and resiliency activities, and see ClimateScore Global in action.
Megan Arnold is the Competitive & Regulatory Intelligence Manager at Jupiter Intelligence.
Elisa Seith is a Solutions Architect at Jupiter Intelligence.