Executive Summary

1.Executive Summary

Global emissions are increasing at a fast pace making climate change a far bigger reality than one could ever imagine.

India, alone lost over USD 80 billion in economic losses over two decades (2000-2019) due to climate change1 . According to estimates, climate change could cost businesses and investors across the world over USD 1.2 trillion over the next 15 years2 .

Thus, there is a growing realization that the community including businesses and investors need to be more proactive in incorporating climate risk considerations in their operations along with Government which need to include climate change resilience initiatives in its policies. Climate risks are predominantly categorized into physical risks and transition risks, wherein physical risks are due to the physical effects of climate change such as extreme weather events, rise in sea levels, melting of glaciers etc.; and transition risks result from various policy, legal, technology and market changes that makes one shift to a low carbon economy.

Both kinds of risk have implications on the long term returns of businesses, particularly on the investors. If not addressed, these risks can impact the macroeconomic performance of the country and as a consequence increase the cost of capital for investing in the country. It is important, that these risks be analysed considering different scenarios and priced into investment decisions.

The discussions on climate risk mainstreaming has achieved the momentum only in 1980’s with the support of various multilateral and bilateral organizations which includes formation of United Nations Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol, among others. Recently, the Paris Agreement by UNFCCC has played a large role in implementing climate change initiatives across countries with the aim to restrict increase in the global average temperature among countries to below 2°C above pre-industrial levels by 2100. To achieve this, global

Physical Risks

are due to physical effects of climate change such as rise in sea levels, wildfire, floods etc.

emissions need to be 25% lower than the 2017 level (2017 levels were at 53.5 GtCO2e)3. A clear understanding of what constitutes climate change and the associated risk along with its long term effects will be very instrumental in curbing climate change.

TCFD Recommendations Thematic Areas

The metrics and targets used to assess and manage climate-related risks and opportunities.

The process used by organizations to identify, assess and manage climate-related risk.

Transition Risks

result from various policy, legal, technology changes in the organization in order to adopt low carbon economy.

The actual and potential impacts of climaterelated risk and opportunities on the organization’s business, strategy and financial planning.

The organization’s goverance around climaterelated risks and opportunities.