The project is being undertaken by the United Nations Environment Programme – Finance Initiative (UNEP FI) and a Working Group of 16 leading banks as noted in the UNEP FI press release (October 31, 2017). The Working Group was established in June following the final recommendations by the Financial Stability Board’s (FSB) Task Force on Climate-Related Financial Disclosures (TCFD).
“One of the buzzwords in the sustainable finance world is 'mainstreaming',” notes Eric Usher, the Head of UNEP FI. “For us to achieve a sustainable financial sector we need to mainstream environmental factors from the periphery of financial institutions' attention into their core decision-making. This is a key objective not only of UNEP FI but also of the TCFD. We are therefore very pleased to have the support of Oliver Wyman and Mercer as we work together with 16 global banks to operationalize and mainstream the TCFD recommendations into their core businesses.”
Oliver Wyman and Mercer, jointly with UNEP FI and the Working Group, will develop common analytical tools – including scenarios, methodologies and metrics – for banks to strengthen their assessment and disclosure of climate-related risks and opportunities. This will enhance the ability of the group in implementing the TCFD recommendations and promote consistency and comparability in climate change assessments and disclosures across the sector.
The focus of the Oliver Wyman and Mercer team will be on transition risks associated with different scenarios for decarbonising the economy. In addition, Acclimatise, a UK-based climate change advisory and analytics company, is also involved in the project and will be responsible for the elements related to physical risks under different climate scenarios.
Oliver Wyman will leverage its deep experience in stress testing and credit risk measurement to help banks assess and mitigate climate risk. The project will draw upon Mercer’s well established climate scenario risk tool, which was developed in partnership with a number of large global institutional investors and published in 2015.
“The translation of climate risk factors into prospective financial performance is less well understood than more traditional risk types in financial services,” said John Colas, Oliver Wyman partner. “Helping the industry develop a methodology to measure and disclose these risks will serve to enhance overall risk management and better inform strategic capital allocation decisions. This integration of climate risk factors within existing frameworks will help underpin meaningful actions towards future sustainability.”
“The Task Force’s vision was to encourage collaboration and consistency in approach,” notes Mercer partner and FSB Task Force member Jane Ambachtsheer. “This project fits the bill”.
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