Climate change risk or ‘climate risk’ is an increasingly topical issue for companies and investors. We have been engaging with our stakeholders and monitoring recent developments in the area closely. With reporting season just around the corner, it is an ideal time to outline ASIC’s expectations in this area.
What is climate risk?
Climate risk is generally considered to be constituted by physical risk (either acute, event driven risk or long-term changes to climate), transition risk (changes to law, policy, markets and technology to mitigate and/or adapt to climate change) and legal liability risk (those who suffer harm seek recompense from those believed responsible). When we think about climate risk, we generally do so with this definition in mind.