Every Christmas the Oxford Dictionary announces its word of the year. This year it’s ‘climate emergency’. Over the last twelve months there has been a rapid acceleration in climate activism around the world.
Climate change was, for the first time, a key issue in the UK general election. In 2020, as we head towards the COP26 Conference in Glasgow, we can expect the debate to intensify on what governments and corporates are doing to tackle climate change.
COP26 provides a huge opportunity for the energy industry to respond and make clear that, contrary to popular opinion, it is actually leading many of the positive reforms required to tackle this growing global crisis.
With the global spotlight on Britain ahead of COP26, the UK Government will be under enormous pressure to show it has a clear plan to reach Net Zero carbon emissions and thereby secure its place as a leader in the fight against climate change. As part of this, the Government has already announced plans to mandate the Financial Stability Board Task Force (TCFD) on Climate-related Financial Disclosures, which was created to help investors understand their financial exposure to climate risk and help companies disclose this information in a clear and consistent way. It has also recommended disclosures for all listed companies by 2022, with the PRI (Principles for Responsible Investment) mandating it for all signatories by 2020. Meanwhile, new regulations on financial institutions mean that they will be demanding more information from their investments around ESG factors.
The TCFD recommendations will create a step change in the expectations of what organisations need to disclose around their strategy, risks, governance and metrics in respect of climate risk – and we expect the interest in these disclosures will be very high. The recommendations move the focus from reporting on a company’s business model’s carbon footprint (a corporate social responsibility issue) to the financial impact of climate risk on the business model (a key risk and financial issue).
Energy companies need to grab this opportunity to tell their climate change story. Setting the right narrative now is absolutely critical as investors, lenders and credit rating agencies will be using it to compare companies and make their sustainable investment decisions. It will also be a key driver in a company’s ability to retain and attract top talent, and consumers will take notice and potentially change their spending behaviours as a result.
The wave of press coverage around Climate Change in recent months has resulted in a fundamental shift in the sentiment of the British public and they are now looking to corporate Britain, including the country’s vital and vibrant energy sector, to react and help tackle the growing climate emergency.
Simon Virley is a Partner and UK Head of Energy and Natural Resources at KPMG