Considering The Impact Of Climate Change On Investment Portfolios
A consortium of local and international companies, led by DNA Economics and including The Green House, WWF-SA, Six Capitals Advisory, and Vivid Economics, received funding from the UK PACT (Partnering for Accelerated Climate Transitions) programme to support local investment managers and pension funds to better understand the climate-related financial risks and opportunities they face. The project was implemented under the guidance of ASISA, Batseta and the JSE.
Aligning South Africa's Climate-Related Financial Disclosure With Global Best Practice.
Related Initiatives
The project is collaborating with existing initiatives that support TCFD disclosure to enhance its impact and avoid duplication of effort.
South Africa’s Sustainable Finance Initiative.
The Initiative includes several relevant Working Groups established under the Climate Risk Forum Steering Committee hosted by the Banking Association South Africa and chaired by National Treasury.
https://sustainablefinanceinitiative.org.za/
JSE’s Sustainability and Climate Change Disclosure Guidance
The Johannesburg Stock Exchange (JSE) developed Sustainability and Climate Disclosure Guidance consultation papers to promote transparency and good governance and guide listed companies on best practice in environmental, social and governance (ESG) disclosure.
For more information on DNA’s climate change and energy work please contact:
Brent Cloete at +27 (0)12 362 0024 or email us on contact@dnaeconomics.com.
Assets:
INTRODUCTION TO THE TRANSITION RISK ANALYSIS SUPPORT TOOLKIT
The Transition Risk Analysis Support Toolkit was created to support the asset management and retirement fund industries during the climate-related financial disclosures journey. Please click on the icon to the right for an overview of the Toolkit and a description of its other components.
TRANSITION RISK ANALYSIS SUPPORT TOOLKIT – WEBINAR RESOURCES OUTLINE
The document provides an overview of the content covered during the best-practice asset owner and asset manager workshops training workshops.
TOOLKIT ELEMENT 1: CLIMATE RISK DUE DILIGENCE GUIDE FOR ASSET OWNERS
Guide provides a quick and easy entry point into climate-related financial risk and opportunity analysis and disclosure for asset owners. The Guide includes a set of 11 questions with guidance on how to interpret responses that can be used to assess the climate competency of asset managers.
TOOLKIT ELEMENT 2: FINANCIAL SECTOR GOOD PRACTICE TCFD-ALIGNED DISCLOSURE EXAMPLES
Document showcases examples of detailed and useful TCFD disclosures. The TCFD recommendations are intended to create a flexible disclosure standard built around iterative improvements, and as such the examples are not intended to define the ‘correct’ way to disclose information, but rather to provide an indication of what good disclosure looks like.
TOOLKIT ELEMENT 3: CARBON PRICE TRAJECTORY TOOL
Simple spreadsheet tool that can be used to consider how international carbon prices may influence South African carbon prices to 2050.
TOOLKIT ELEMENT 4: RESOURCES TO SUPPORT IMPLEMENTATION OF THE RECOMMENDATIONS OF THE TCFD
Filterable MS Excel database of resources to support climate-related financial disclosure. The resources are organized to allow searches by theme and TCFD disclosure pillar.
TOOLKIT ELEMENT 5: SOUTH AFRICA’S INTERNATIONAL AND LOCAL CLIMATE COMMITMENTS
Document discusses South Africa’s climate commitments and their implications for sectors and companies to help inform financial sector decision-making.
TOOLKIT ELEMENT 6: QUANTIFYING GREENHOUSE GAS EMISSIONS FROM INVESTMENTS
This element provides investors with guidelines on how to obtain or estimate greenhouse gas emissions data for companies to help guide portfolio assessments and investment decision-making. The element includes a guidance document (icon to the right) and an accompanying spreadsheet tool (here).
TOOLKIT ELEMENT 7: USING SCENARIOS TO UNDERSTAND TRANSITION RISK
Document introduces scenarios and motivates for using scenarios to improve the quality of climate-related financial disclosures. It is intended as background reading for readers who wish to access the more advanced material on the use of scenarios in climate-related risk and opportunity analysis developed as part of this project.
ANIMATED VIDEO – THE ROLE OF SCENARIO ANALYSIS IN TCFD-ALIGNED DISCLOSURES
A Short animated video that explains in simple and easy-to-understand terms how the Task Force on Climate-related Disclosures (TCFD) recommends scenario analysis be used to increase the value of climate-related disclosures.
TOOLKIT ELEMENT 8: THE JUST TRANSITION IN CLIMATE-RELATED FINANCIAL DISCLOSURES
Document motivates for the inclusion of Just Transition considerations in climate-related financial disclosures on the basis that neglecting it could create reputation risk with material financial impacts.
TOOLKIT ELEMENT 9: CLIMATE COMMITMENTS AT THE COMPANY LEVEL
Document considers the evolution of climate targets and discusses how companies can develop credible climate targets in line with the recommendations of the TCFD.
THE IMPACT OF TRANSITION RISK ON SA EQUITIES – A BEST-PRACTICE SCENARIO DISCLOSURE EXAMPLE
This document provides an example best-practice scenario analysis disclosure following TCFD guidance. It first provides a lens through which climate-related risks can be considered and identified, and then explains the methodology for conducting the analysis in South Africa. The results of the scenario exercise shows that a portfolio of 55 of the largest companies listed on the JSE could lose between 5% and 8% its value by 2050 as a result of policy actions to contain climate change. The impact on companies in some sectors could be much larger – with companies in four sectors potentially losing a quarter or more of their value if business models are not amended.
TCFD – ASSESSING AND REPORTING ON PHYSICAL RISK
This report offers an introduction to physical risk and how it features in climate-related reporting for financial institutions. To assist users in conducting physical risk assessments, a list of data sources and assessment toolkits is provided. In addition, an initial assessment of data availability for analysis in the South African context is undertaken.
SUSTAINABLE INVESTING 2.0 WHAT PART SHOULD SOUTH AFRICAN RETIREMENT FUNDS PLAY?
A special edition of the Atleha-edu publication entitled “Sustainable investing 2.0: what part should South African retirement funds play?” contains a summary of the project outputs.