Considering the impact of climate change on investment portfolios

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.

https://www.jse.co.za/our-business/sustainability/jses-sustainability-and-climate-change-disclosure-guidance

Aligning South Africa's climate-related financial disclosure with global best practice.

There is growing evidence that climate change, and efforts to contain it, will influence the value of investments and the stability of financial systems. The detailed disclosure of the expected impact of risks and opportunities linked to climate change is required to enable investors to factor this into their investment decisions.

Despite South Africa being one of the most advanced markets in terms of the integrated reporting of ESG factors in the world, local climate-related financial disclosure is still in its infancy. While this is changing, and levels of disclosure are increasing fast, significant effort is still required before local climate-related financial disclosures will provide sufficient information for investors to make informed investment decisions.

A consortium of local and international companies, led by DNA Economics and including The Green House, WWF-SA, Six Capitals Advisory, and Vivid Economics, has 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 is being implemented under the guidance of ASISA, Batseta and the JSE. For more information on the project and UK PACT, please see the Introduction document below.

The project has three main components:

Provide climate-related financial disclosure capacity building and training, ranging from foundation-level training covering the basic concepts, terminology, and importance of climate-related financial disclosure, to best-practice training centre on the use of the newly developed toolkit and transition risk scenarios.
Develop a user-friendly climate-related financial risk and opportunity analysis toolkit to address barriers that are currently preventing disclosure.
Quantify the transition risk faced by an indicative portfolio of 50+ highly invested JSE-listed companies and develop a best-practice TCFD-compliant climate-related financial disclosure example based on this information.

All project information, tools, guides, templates etc will be open source and publicly available on this webpage.

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.

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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.

PROJECT RESOURCES

ALIGNING SOUTH AFRICA’S CLIMATE-RELATED FINANCIAL DISCLOSURE WITH GLOBAL BEST PRACTICE: AN INTRODUCTION

A short introduction to the project and UK PACT. The document includes contact details should you wish participate in or learn more about the project.

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VIDEO CLIP - INTRODUCTION TO CLIMATE RISK AND THE ALIGNING SOUTH AFRICA’S CLIMATE-RELATED FINANCIAL DISCLOSURE WITH GLOBAL BEST PRACTICE PROJECT

Please see this short video for an introduction to the project and an explanation of why it is important to consider climate risks and opportunities when making investment decisions.

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ANIMATED VIDEO – AN INTRODUCTION TO CLIMATE RISK

A short animated video that introduces climate risk in simple and easy-to-understand terms.

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ANIMATED VIDEO – THE IMPACT OF CLIMATE CHANGE ON INVESTMENT

A short animated video that explains why climate risk is an investment risk in simple and easy-to-understand terms.

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CLIMATE RISK & INVESTMENT WEBINAR SERIES

This series of four complimentary webinars provides participants with an introduction to climate risk and investment by providing an introduction to climate change, an introduction to the TCFD recommendations and why it’s important to consider climate-related financial risks and opportunities. The webinars are open to all interested parties wanting to understand the risks and opportunities climate chance poses to investments.

CLIMATE RISK AND INVESTMENT WEBINAR 1 - INTRODUCTION TO CLIMATE RISK & INVESTMENT

The first webinar in our foundation-level training series introduced climate risk & investment. Please click on the icon to the right for a recording of the webinar. The slides used during the webinar are available HERE.

CLIMATE RISK AND INVESTMENT WEBINAR 2 -INTRODUCTION TO CLIMATE REPORTING TRENDS & FRAMEWORKS

The second webinar in our foundation-level training series considered the frameworks used to report climate risks and opportunities and introduced the Taskforce on Climate-related Financial Disclosures (TCFD). Please click on the icon to the right for a recording of the webinar. The slides used during the webinar are available HERE.

CLIMATE RISK AND INVESMENT WEBINAR 3 - INTRODUCTION TO GOVERNING AND MANAGING CLIMATE RISK

The third webinar in our foundation-level training series considered the role of management and the board of directors in identifying and managing climate risk. Please click on the icon to the right for a recording of the webinar. The slides used during the webinar are available HERE.

CLIMATE RISK AND INVESMENT WEBINAR 4 - DETERMINING THE EXPECTED IMPACT OF CLIMATE RISK

The fourth webinar in our foundation-level training series considered the role of metrics and targets in conveying the expected impacts of climate change. Please click on the icon to the right for a recording of the webinar. The slides used during the webinar are available HERE.

FOUNDATION-LEVEL TRAINING WORKSHOP - ASSET MANAGERS

The virtual workshops were part of our foundation-level training series and expanded on the introductory webinars by addressing industry-specific issues in greater detail. This workshop was targeted at the asset management industry. Please click on the icon to the right for a recording of the workshop. The slides used during the webinar are available HERE.

FOUNDATION-LEVEL TRAINING WORKSHOP - ASSET OWNERS

The virtual workshops were part of our foundation-level training series and expanded on the introductory webinars by addressing industry-specific issues in greater detail. This workshop was targeted at asset owners. Please click on the icon to the right for a recording of the workshop. The slides used during the webinar are available HERE.

SCENARIO TRAINING WORKSHOP

The scenario training workshop was the first in a series of more advanced training sessions. The workshop introduced scenario analysis and highlighted why it is important when identifying and quantifying climate risks and opportunities. An approach was presented that allows institutions to overcome data limitations to start generating useful insights via scenario analysis. A practical example of applying scenario analysis in South Africa was also provided. Please click on the icon to the right for a recording of the training session. The slides used during the webinar are available HERE.

Climate-related financial disclosure: A South African perspective

This report introduces climate-related financial disclosure from a local perspective and motivates for better and more disclosure by South African institutions. It also provides an overview of current levels of disclosure in South Africa.

THE STATE OF CLIMATE-RELATED FINANCIAL DISCLOSURE IN SOUTH AFRICA – AN INTRODUCTION (1)

The first in a series of three animated videos that summarises the content of the research report Climate-related Financial Disclosure in South Africa (here) in simple and easy-to-understand terms.

THE STATE OF CLIMATE-RELATED FINANCIAL DISCLOSURE IN SOUTH AFRICA – TCFD RECOMMENDATIONS (2)

The second in a series of three animated videos that summarises the content of the research report Climate-related Financial Disclosure in South Africa (here) in simple and easy-to-understand terms. This video emphasises that the barriers to starting the TCFD reporting journey is lower than generally believed. It also discusses the opportunities linked to a just transition to a low-carbon economy.

THE STATE OF CLIMATE-RELATED FINANCIAL DISCLOSURE IN SOUTH AFRICA (3)

The third in a series of three animated videos that summarises the content of the research report Climate-related Financial Disclosure in South Africa (here) in simple and easy-to-understand terms. This video focuses on the state of climate-related financial reporting in South Africa in 2021.

Climate-related disclosures for financial institutions: International best practice review

This report provides and overview of climate-related financial disclosure international best practice and is intended to support institutions that want to embark on the disclosure journey.

Climate-related financial disclosure fact sheets

The fact sheets summarise the climate-related disclosure practices of more than 50 of the largest companies on the Johannesburg Stock Exchange (JSE). They were developed using publicly available data and are intended to stimulate discussion. The fact sheets will also be utilised during project capacity-building and training activities.

Climate-related financial disclosure – Aligning South Africa to global best practice

A special edition Atleha-edu publication supported by South Africa-UK PACT provides an overview of climate risk and investment, with specific attention being paid to climate risk and corporate reporting in South Africa. It incorporates insights from the South African perspective report, the international best practice reviews, and the climate-related financial disclosure fact sheets.

SHORT ARTICLE 1 - WHY CLIMATE RISKS IS IMPORTANT TO INVESTORS

This is one of four articles simplifying the content of the special edition Atleha-edu to the information easily accessible. The article is available in English and isiXhosa and an English audio file. isiXhosa audio option coming soon!

SHORT ARTICLE 2 - USING SCENARIOS TO BETTER UNDERSTAND CLIMATE RISK

This is one of four articles simplifying the content of the special edition Atleha-edu to the information easily accessible. The article is available in English and isiZulu and an English audio file. isiZulu audio option coming soon!

SHORT ARTICLE 3 - MANAGING CLIMATE RISKS

This is one of four articles simplifying the content of the special edition Atleha-edu to the information easily accessible. The article is available in English and Sesotho and an English audio file. Sesotho audio option coming soon!

SHORT ARTICLE 4 - INVESTMENT OPPORTUNITIES PRESENTED BY THE TRANSITION TO LOW-CARBON ECONOMIES

This is one of four articles simplifying the content of the special edition Atleha-edu to the information easily accessible. The article is available in English and XitSonga and an English audio file. XitSonga audio option coming soon!