Managing Climate Risk, Enhancing Climate Action
Mindful Money welcomes today’s announcement by the Minister for Climate Change requiring mandatory reporting on climate risks. This provides the basis for transparency and accountability for climate risks, impacts and action.
This is an important step forward in providing greater transparency from the financial sector and a financial foundation for climate action. Disclosure provides benefits for investors, financial regulators, climate policy-makers and financial institutions themselves as they are required to assess risk systematically across their organisations. The finance sector has been a strong supporter of this policy, as has research institutes and civil society, including charities like Mindful Money.
Mindful Money’s Founder and CEO, Barry Coates commented: “Investors need transparency on the management of risk and the actions undertaken by the financial sector. Currently, most investment providers, banks, insurers and other financial institutions claim to take climate change into account. This will provide the information to see if they are actually doing so.”
“While the report is primarily aimed at identifying and managing climate risks, it also provides a basis for measuring the impacts on greenhouse gas emissions from investment, lending and insurance. What gets measured and put into the public domain gets managed. The value of this framework is in being able to hold financial institutions to account, as well as assessing risk.”
“Without analysis, the reports will be of limited use. They will be relevant and powerful when they are used as a basis for comparison with financial competitors, related to good practice and as a basis for financial decisions. Mindful Money will develop its current online platform to build in comparative data on management of climate risk, climate impacts and climate resilience for retail investors.”
“The TCFD is a foundation for performance measurement. Mindful Money will work with partners to use the disclosures as a driver for informed choice by investors. Market dynamics will reward the leaders and incentivise the laggards to up their game.”
“While the reporting of climate risks is important, it calls into question why financial institutions are not also being required to report on other non-financial risks and impacts. For example, annual surveys of the New Zealand public show that investors in KiwiSaver and investment funds are also concerned about their funds being invested in companies that repeatedly violate labour standards, indigenous people’s rights and human rights. Similar processes to TCFD are required for reporting on management of risks related to international norms such as human rights.”