GovernanceDisclose the organisation's governance around climate-related risks and opportunities Leadership
Implementation
Risk
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StrategyDisclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning where such information is material Leadership
Implementation
Risk
|
Risk managementDisclose how the organisation identifies, assesses and manages climate-related risks Leadership
Implementation
Risk
|
Metrics & targetsDisclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material Leadership
Implementation
Risk
|
TCFD reporting compliance for infrastructure project consultants
14 Nov 2022, 10:57 am
Consultants preparing to implement the requirements of the Taskforce on Climate-related Financial Disclosures (TCFD) will be at different stages on their reporting journey.
Our maturity matrix will enable these businesses to understand the maturity of their current climate risk practices; benchmark how they perform against peers and best practice; and identify the gaps they will need to address as they improve and develop their disclosures through the annual reporting cycle.
We have categorised consultants as 'beginner' (limited disclosure), 'intermediate' (moderate disclosure) and 'leader' (full disclosure) for the purposes of this guide. Similar guides are available for asset owners, contractors and suppliers.
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Beginner: thinking about the issue
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Intermediate: planning, organising, getting ready for action
Governance
Disclose the organisation's governance around climate-related risks and opportunities
Leadership
- Board to have strategic responsibility for climate risk and ESG matters, to be implemented through the executive function.
- Set up structures to enable board to have capacity and competence on climate-related risks and opportunities.
- Climate-related risks are listed on the risk register and subject to wider risk management and audit procedures.
- Board consideration of impact of climate change claims on the global business.
- Board focus on impact of climate-related risk on client businesses and development of expertise in new areas to aid in developing solutions to control and mitigate climate related risk and develop climate-related opportunities.
- Consideration given to how climate strategy will be prioritised and achieved in practice, in an integrated way, working across functions, disciplines and geographies.
Implementation
- Plan know-how distribution and reporting across functions, disciplines and geographies within the consultant’s group in respect of client work and key trends in climate-risk related risks and opportunities.
- Invest in competence and capacity within the consultant’s multi-disciplinary leadership teams to ensure effective leadership and responsibility for enterprise, sustainability & innovation, to drive the strategy around providing advice to clients and to build expertise and capacity to advise effectively across functions, disciplines and geographies.
Risk
- Develop a governance system to manage climate-related risks and to ensure clear consideration of physical, transition and liability risks across all elements of the consultant's business and portfolio.
Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning where such information is material
Leadership
- Take a lead role and contribute intellectual capital to coalitions of clients and industry stakeholders to support delivery of the UK government’s pledge to have net zero greenhouse gas emissions by 2050.
- Invest in building additional expertise in order to support clients to transition to net-zero by supporting clients in (as appropriate):
- transition planning, identifying risks and opportunities associated with climate-related risks;
- developing realistic organisational, institutional and regulatory frameworks for net zero;
- working with supply chains effectively;
- advising on new legal, commercial, technical and business issues;
- assisting with financial planning and financing.
Implementation
- Implement short-term activities including:
- reducing own carbon emissions;
- increasing activity advising clients in transitioning to or building renewable energy supply; and
- advising clients on issues in connection with the advancement of new materials, reducing embodied carbon of assets and implementation of digital strategy to support lower carbon performance.
- Identify plan for achieving medium-term activities including (as appropriate):
- supporting the growth of the circular economy in key markets;
- building financial resilience within the business to cope with the increasing transition from fossil fuel to renewable energy;
- developing advisory in new technologies including hydrogen and carbon capture and storage as well as green materials and methodologies;
- increased digital technologies (including BIM and digital twins).
- Actively manage own carbon emissions through planning over the short, medium and long-term including:
- access to improved carbon consumption data;
- switch to renewable energy supplies;
- reduction in business travel;
- switching hired vehicles to a hybrid electric fleet;
- accreditation to PAS 2060, the international standard for carbon neutrality.
- Procure services and goods that are environmentally, socially and economically responsible, and sustainable.
- Provide project case studies for clients based on successful advisory mandates where carbon has reduced.
- Invest in projects which neutralise current GHG emissions.
- Encourage landlords to improve the environmental performance of the buildings the consultant occupies.
- Raise awareness and understanding of environmental issues with employees, clients, and suppliers.
- Ensure that meetings and events are held in a sustainable manner.
- Undergo assurance for data and disclosures across sustainability programme, enhancing the integrity, quality and usefulness of the information provided.
- Ongoing education of global professional teams on their environmental impact and how to improve professional and personal sustainability, at home and in the workplace.
- Ongoing engagement and interaction (through research, investment, education, support and activities) for global manufacturing and logistics teams on best practice methodologies and performance measurement for improving efficiencies and lowering emissions within end to end processes.
Risk
- Quantify the short, medium and long-term priorities, plans and activities identified to reduce the impact of climate-related risks and leverage the opportunity for climate-related opportunities and consider how they will impact the businesses, strategy, and financial planning.
- Implement firmwide training programme on climate-related risks including nature-based risks.
Risk management
Disclose how the organisation identifies, assesses and manages climate-related risks
Leadership
- Work with industry to collectively plan for the response to climate-related risks.
- Invest in capability to advise clients on mitigation and management of climate-related risks in key geographies and markets.
Implementation
- Identify risks through a number of different forums such as risk workshops, risk champion forums and engagement with senior leaders and other stakeholders.
- Develop a supplier company-wide integrated enterprise risk management (ERM) process for managing climate-related risks, combining a bottom-up operational review with a top-down strategic review and external perspectives to ensure comprehensive risk identification.
- Consider what kind of current clients and projects will not be relevant or cannot be advised on in the future as a result of climate-related risks.
- Consider what new capability and market expertise will be required in the future as a result of climate-related risks and identify a plan to close any gaps in capacity and skills.
Risk
- Commission a robust and holistic third-party assessment of potential climate-related risks and opportunities and estimate the likely impact of the risks on the organisation's strategy and financial planning. This assessment should be broad and include internal stakeholder consultation, literature review, peer comparison and scenario analysis.
- Categorise risks into potential and current risk and identify controls and mitigation.
- Identify and assess climate-related physical risks across the organisation’s key operating locations and affecting key clients and markets for advisory work.
- Recognise the organisation's exposure to various risks arising out of natural disasters (for example hurricanes) as they could disrupt public and private infrastructure, including communications and financial services, which could disrupt normal business operations/increase prices.
- Recognise the organisation's exposure to the impact of climate-related risks on clients’ businesses and markets and the need to change and adapt to meet the ongoing needs of clients and the needs of emerging new clients in relation to climate-related risks.
- Consider impact on the business if access to underwriting markets for certain lines of PI coverage becomes unavailable or difficult due to the impact of climate change on the claim’s environment, thereby having a negative impact on their clients’ access to coverage, and consider potential financial impact on consultant’s business.
Metrics & targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material
Leadership
- Measure and report on Scope 1, 2 and 3 GHG emissions and the related risks.
- Commit to reducing GHG emissions to net zero by 2050 and develop and publish quantified targets to reduce GHG emissions in relative or absolute terms (Scopes 1, 2 and/or 3) and report on performance against these.
- Develop and publish quantified targets to reduce GHG emissions in relative or absolute terms (Scopes 1, 2 and/or 3) (including a commitment to reduce GHG emissions to net zero by 2050) and measure performance against these.
- Identify the key metrics relevant to the consultant’s business impacting climate-related risks and opportunities.
- Align with the GHG Protocol Corporate Accounting and Reporting Standard to report on emissions from all the consultant’s operations and use the most recent conversion factors from the Department for Business, Energy and Industrial Strategy.
- Measure ESG progress against industry ESG performance benchmarks e.g., Sustainalytics, DJSI, CDP, MSCI, ISS and EcoVadis.
Implementation
- Obtain independent verification of the calculation of 2021 GHG emissions assertion, in accordance with industry recognised standard ISO 14064-3.
- Engage with external Scope 3 reporting experts to support the development of a reporting methodology and to establish a Scope 3 baseline and collect Scope 3 emissions related data across all of the Consultant’s operations.
- Focus on obtaining broad data from a wide variety of sources impacting the business including capital investment data, green capex forecasts, EU taxonomy KPIs, greenhouse gas emissions, climate change science data, costs of exceptional physical events, network reliability, climate transition pathways and customer feedback.
- Implement measurement methodologies in line with best industry guidance relevant to a consultancy business.
- Publish targets for managing climate-related risks and opportunities and performance against targets with employees and clients.
Risk
- Identify and publish metrics to include climate-related risks and opportunities associated with consultant’s operations including energy, land use, water and waste management.
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Leader: doing, making a difference
Governance
Disclose the organisation's governance around climate-related risks and opportunities
Leadership
- Climate action is an integral part of business strategy and risk management, driven by the board, with implementation through an organisation-wide governance structure.
- The board has capacity and competence (through the use of board committees or similar arrangements) to respond to climate-related risks and opportunities effectively, with close involvement of the most senior members of the board and executive function. This enables the board members to set the organisation’s global climate strategy.
- The risk management and audit committee reviews group level climate-related risks periodically and makes financial disclosures.
- Board to consider impact of transition to deep decarbonisation on consultant's future portfolio.
Implementation
- Cross-functional/multi-disciplinary teams work together in advising clients on climate-related risks and connected issues and share best practice and ideas.
- Remuneration and financial incentives for executives focussed on progress towards achieving short, medium, and long-term climate opportunities through the establishment of new markets and solutions.
- Collaborate closely with client boards to understand how climate-related issues are affecting business and assist in applying intellectual capital towards new solutions.
Risk
- Have a system in place for internal controls, to ensure any emerging risks and uncertainties are taken into account in the company’s accounting judgments, disclosures, processes, audit and financial statements.
- Process introduced to assess climate risk specifically on individual projects.
Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning where such information is material
Leadership
- Obtain verification by the Science Based Targets initiative (SBTi).
- Describe and publish the resilience of the consultant's strategy to deal with different climate-related scenarios, including a 2°C or lower scenario.
- Provide extensive data on performance through public submissions on climate and ESG disclosures to investors and clients.
- Be a role model for others through vocal advocacy for action on climate change and by setting up/participating in impactful pro bono projects with peers, intermediaries and clients. Through this work, contribute intellectual capital and resource in order to progress climate science and bring about transformational action and guidance on climate change resilience and adaptation, on a local and international basis.
- Fund contributions to science and help translate the science-based impacts to the cause and effect of everyday project decision-making.
Implementation
- Progress short-term activities on a high priority and consistent basis and have short-term activities updated regularly to maintain focus and ensure progress.
- Implement plans for and invest in the progression of medium-term activities on a high-priority and consistent basis and have medium-term activities updated regularly to maintain focus and ensure progress.
- Plan for adaptation of business as a result of long-term deep decarbonisation of industry and future net-zero operating environment including (as appropriate):
- considering whether to continue to advise clients in fossil fuel industries long-term;
- increased volume of work advising on new technology projects including hydrogen and carbon capture technology;
- greater integration of digital within built environment programmes to implement carbon reduction across high impact areas of the consultant's business in action on an ongoing basis.
- Continue to invest in developing and growing deep expertise and broad capacity in order to be able to effectively advise clients in the successful implementation of renewable energy programmes including emerging technologies like hydrogen and carbon capture.
- Drive innovation throughout the supply chain, foster cost reduction to the point where net zero retrofit is self-financing from the value of income and savings delivered by the retrofit and therefore deliverable at scale across the UK.
- Development of an internal carbon pricing strategy.
- Have a team which also focuses on the reduction of environmental impact of the business and its assets and not just the reduction to net zero.
Risk
- Integrate scenario analysis outcomes into investment strategy and business plan.
- Test reliance of investments and portfolios to selected scenarios.
- Management of climate-related risks dealt with in the same way as the business approaches all other risks.
- Identify the investment that the business is going to make in managing climate-related risks and opportunities.
- Withdraw from polluting industries such as coal-fired power generation.
Risk management
Disclose how the organisation identifies, assesses and manages climate-related risks
Leadership
- Integrate climate-related risks into risk reporting processes and more widely into the consultant’s governance processes.
- Consider transition risks and ensure that they are factored fully and consistently into the consultant’s future financial long-term forecasts for those areas of the balance sheet whose recoverability is assessed based on expected future cash flows, including people costs, property, plant and equipment, intangible assets, investment properties and deferred tax assets.
- Consider both internal and external threats to physical assets, data, intellectual property and the vulnerabilities within each.
- Develop and implement processes for managing climate-related risks across the consultant organisation.
- Develop client solutions, deep expertise and capacity for advising clients on mitigation and management of climate-related risks in key geographies and markets.
Implementation
- Develop risk management strategies to improve resilience with prioritisation of risks done through a collaborative process on an ongoing basis taking into account that the risk, and potential opportunities, will change over time.
- Where appropriate, train project teams in identifying climate risks in the context of client work on projects.
- Define and support action plan to strengthen climate resilience at asset level.
- Develop consultancy expertise in the migration and management of climate-related risks on projects.
Risk
- Identify how climate-related risks are prioritised (for example using risk assessment tools).
- System in place for identification of risks on a global scale before they come to fruition and focusing on countermeasures that safeguard data, people, projects and communities.
- System in place for ongoing identification of risks on individual projects.
- Ongoing risk analysis, monitoring and reporting on impact of transition risks to consultant’s business including impact on key markets, capacity to advise in green markets, impact of climate-related risks on existing and future client portfolio and rise in climate change compliance claims.
- Financial reporting on opportunity for advisory work for clients on implementing climate-related risk management across their respective businesses and operations.
- Financial reporting on advisory work across new 'green' markets, and any drop in advisory work in high emission markets.
- Assess financial impact of executing actions for addressing climate-related risks as identified in strategy over time horizons that allow for appropriate financial planning.
Metrics & targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material
Leadership
- Adhere to the United Nations Science Based Targets initiative and follow guidance from Intergovernmental Panel on Climate Change (IPCC).
- Utilise metrics to assess climate-related risks and opportunities in line with the organisation’s strategy and risk management process.
- Refine and update appropriate targets to manage climate-related risks and opportunities, including use of science-based targets, appropriate to a professional services business like the consultant's and refine and update a methodology to monitor performance against these targets.
Implementation
- Engage with suppliers to understand those suppliers’ metrics and targets and approach to improvement.
- Make changes to global procurement policies and procedures to positively discriminate to support the achievement of Scope 3 targets.
- Provide assurance of reported GHG emissions against International Standards on Assurance Engagements.
- Implement ISO 14001-certified Environmental Management System and Environmental Sustainability Standard.
- Measure and report in accordance with the World Resources Institute and World Business Council on Sustainable Development Greenhouse Gas Protocol.
- Regular verification of methodology for measurement of emissions against relevant best industry standard(s) applying to all aspects of the business.
- 100% of Scope 1, 2 and 3 emissions independently assured against ISAE 3410 Assurance Engagements on Greenhouse Gas Statements.
- Collect and report data complying with the UK government’s Streamlined Energy and Carbon Reporting (SECR) requirements, or other relevant best industry reporting standard(s) relevant to the business.
- Implement systems to enable consultant’s global supply chain to track, collect and share emissions data.
Risk
- Research, monitor and analyse the financial impact of climate risks on the consultant's operations.
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