Environment–schmironment: climate change through a finance & liability risk lens

First it was activist investors. Then mainstream shareholders. And now finance markets, insurance companies, regulators and even auditors are demanding that companies actively address their climate-related financial risks. But why this shift from ‘ethical fringe’ to ‘financial mainstream’, and what does it mean for corporate governance, strategy risk management and disclosure? And how can seemingly divergent national policies, regulatory practices and financial market signals be commercially reconciled? This presentation examines climate risk from the unique perspective of a corporate lawyer, director of a large institutional investor, and faculty member of the University of Oxford’s Sustainable Finance Programme. It focuses on emerging corporate governance issues for FY19, from: • international regulatory developments: the EU’s Green Taxonomy, the UK’s Net Zero Law, and signalling by central banks and prudential regulators; • international financial market trends: integration of climate-related issues into credit ratings and commercial loan margin adjustments; • litigation trends beyond planning and permitting: climate-related negligence, nuisance, directors’ duties and securities fraud claims; and • annual reports: heightened investor expectations around TCFD-aligned disclosures, and new regulatory guidance on the integration (and audit) of climate-related assumptions in balance sheet accounting estimates.