New requisites for the CDP declaration

In a recent statement, Bank of England governor Mark Carney, emphasized the need for financial institutions to disclose their vulnerabilities to climate change. Indeed, he highlighted “catastrophic” consequences that climate change could bring on the financial system unless the institutions are more transparent on how they manage these risks.

A momentum inspired by the TCFD

This message follows the recommendations of the Task Force On Climate-related Financial Disclosures (TCFD) published in 2017. The TCFD was mandated by the G20 Financial Stability Board to provide recommendations to the financial sector on how to communicate the decision-making process with regards to risks related to climate change. The TCFD presented its findings in four categories: governance, strategy, risk management, and indicators and targets. Beyond the recommendations, the TCFD focused on scenario analysis as an essential management tool, in order to integrate the issues related to the transition to a low carbon economy as well as those related to the physical impacts of climate change. In fact, the rating agency S&P Global has concluded that over a period of two years, 106 of the ratings it attributes were modified by taking into account environmental and climate criteria.

In an alignment effort, various information disclosure platforms have updated their forms or guidelines. This is particularly the case for CDP climate change questionnaire that perfectly reflects the recommendations of the TCFD. Of all the changes made to the form for 2018, there are five elements to consider carefully:

Specific questions for high-stakes sectors

The CDP climate change questionnaire now includes questions specific to four sectors: energy, transport, materials and agriculture sectors (details on the CDP website). In particular, it is expected that companies in these sectors will detail their low-carbon transition strategy.

Risk and opportunity analysis

CDP scoring for questions C2.3a / 2.4a reflects the importance of risk management to an organization and the implications for business strategy and financial health. It is a forward-looking focus that responds to the need to account for situations or events that would have an impact on the operations of the organization. Whether it is transition risks or physical risks, organizations have a level of exposure that depends, for example, on where they and their value chain operate (reference).

Inventory of indirect emissions (scope 3)

For several years, GCC has been highlighting the importance for a company (see our last article) of considering indirect emissions. In their 2018 questionnaire, CDP doubled the number of points in question C6.5 to encourage organizations to put more emphasis on all the emissions they rely on to deliver their products or services.

Governance and strategy

These are two new questions, C3.1a and C3.1d, which address the consideration of climate-related scenario analyzes to validate the organization’s business strategy. The idea is to take into account the evolution of the sector of activity in a world that respects the Paris Agreement (see our article), but also to consider other scenarios, such as business as usual. This is not about disclosing confidential information, but to be transparent about how to consider possible future scenarios related not only to the fight against climate change, but also to their physical consequences.

The verification process

The scoring for verification (question C10.1a) of Scope 1 and 2 emissions has been doubled. Verifying GHG emissions is part of carbon management good practices as it gives stakeholders an additional level of confidence in the relevance of this information.

What to remember?

The 2018 CDP questionnaire on climate change includes many changes as well as new questions. To begin, it is recommended to consult the documents available on CDP website. Due to these numerous changes, the deadline has been extended to July 31, 2018 for the submission of investor responses. For the supply chain, responses should be submitted by August 16, 2018. Therefore, there is relatively little time left to respond to stakeholder expectations by demonstrating climate risk management aligned with best practices.

CCG has the necessary expertise to support you through the novelties of the 2018 CDP questionnaire:

  • Risk analysis and opportunities related to the consequences of climate change;
  • Support in the definition of transition scenarios;
  • Quick Scope 3 scans using our VitalMetrics® tool;
  • Verification of emission inventories by our audit team.

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By Pascal Geneviève, General Manager of Carbon Consult Group

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