By Mike Roan
Four letters – T, C, F and D – could spell the difference between apathy and action on climate change among major New Zealand businesses.
TCFD is a model being adopted by leading businesses from Australia to Europe to identify, measure and manage the risks they face from a global rise in temperature.
Named after the Taskforce on Climate-related Financial Disclosures (TCFD for short), its logic is powerful: climate change is a financial risk. Investors and shareholders are demanding a better understanding of that risk and TCFD provides a framework for doing just that.
Globally, estimated losses to business are staggering. Assets at risk from climate change is valued in the trillions of dollars. Businesses must show investors they understand how climate change will impact their prospects, that they have a plan to manage risks and are able to demonstrate action.
It's high time New Zealand businesses face this challenge head-on. Last month Meridian Energy was the first local company to release a TCFD report. From increased frequency and severity of storm events to rapid shifts in technology, Meridian laid out the challenges, how to measure them, and how to respond.
The report wasn't about forecasting future risks – some are affecting Meridian today. But here's the plot twist: this isn't a doom-and-gloom story. It may be ironic to talk about climate change as an opportunity, but with growing awareness of the risks also comes growing awareness of strong and positive climate action as good business practice.
In the electricity sector, up to 32MT of carbon can be removed from the wider energy system through increased electrification of things like transport and industrial heat. That's over 40 per cent of the country's carbon emissions.
It's an opportunity to achieve a net carbon zero New Zealand and an opportunity for our business.
Almost every sector has a similar story. The growth of low emissions products, technologies and services will transform business as we know it today – and it will happen faster than we think.
We can maximise the opportunity for our economy to thrive if we act now but, if we don't tackle this head-on, the impact for business and indeed our way of life will inevitably be very costly.
That's why climate risk reporting is a positive move for business. Investors like competitive advantage. They don't like the prospect of stranded assets or lack of clarity when it comes to resilience, forward thinking or planning for industry disruption.
When the voices of urgency we've heard from thousands of young people marching on Parliament are joined by investors and regulators, they become too loud for responsible business to ignore.
In the UK, listed companies are already facing mandatory climate risk reporting and, every month, the global movement to divest in companies that fail to do so gains momentum.
If money really does talk, TCFD reporting and acting on climate risk will see more businesses in New Zealand playing a great deal more than lip service to the challenges of climate change.
Quite simply, we cannot afford not to.
Mike Roan is the Chief Financial Officer at Meridian Energy