‘Within the TCFD framework, climate risk is seen through the eyes of investors and financial institutions — that is, how will their loans and investments fare in a world of climate-related disruptions? The framework’s stated goal is “to price risk to support informed, efficient capital-allocation decisions.” What factors might businesses take into account in doing this?

Activity 3: Analysing a media article on climate risk

Materials: Joel Makower (2020) What does ‘climate risk’ actually mean. Greenbiz

Before you start:

  • What does ‘risk’ mean to you?

 

  • What sorts of response might you have if you are told there is a risk in some activity you wanted to undertake?

 

Now consider the Makower (2020) article:

Question Your response
In discussing a sudden business interest in ‘climate risk’, Makower ask:

‘Why now? There’s no single precipitating factor’.

Instead, what does he think the trigger for this interest is?

 

  
What does Makower say ‘risk’ means for individuals?

 

  
And what does it mean for business?

 

  
Given this meaning for business, Makower goes on to say:

‘Therefore, in business, risks are not something to be avoided but something to be managed: You want to…’ what?

 

  
Makower goes on to state

‘Within the TCFD framework, climate risk is seen through the eyes of investors and financial institutions — that is, how will their loans and investments fare in a world of climate-related disruptions? The framework’s stated goal is “to price risk to support informed, efficient capital-allocation decisions.”

What factors might businesses take into account in doing this?

 

 

 

  
Later in the article, Makower notes:

‘In theory, companies might make different business decisions to avoid those risks.

But not necessarily: They could decide to incorporate those risks into investment or operational decisions in order to maintain business as usual. So long as a company discloses those risks, investors may be satisfied.’

 

Given the theory we have discussed so far, how could a business do this?

 

 

  
Makower concludes his article by saying:

‘Disclosure is good: Sunlight is the best disinfectant, as the saying goes. But without actually addressing what’s causing the infection in the first place, the patient’s prognosis may be doomed.’

What do you think he means by this?