ANNOUNCEMENTS
Climate change presents both risks and opportunities to businesses. The risks can occur either due to physical impacts of climate change or due to transitioning to a low-carbon future, known as physical and transition risks respectively. However, if properly identified, the opportunities are greater than the risks.
Therefore, proper understanding and analysis of these climate-related risks and opportunities, and their financial implications, is needed to build climate-resilient businesses.
As transparency forms the foundation of significant climate action, proper disclosures of these climate-related issues are also needed by investors, policymakers, lenders and customers for making key decisions.
The Task Force on Climate-related Financial Disclosures (TCFD) was developed as a response to increase in demand of climate-related financial disclosures needed for decision making by stakeholders in the financial market. The impact of climate change is different in different sectors depending on the nature of the sector. All these risks have financial implications and cause structural changes in the economy, leading to creation of both risks and opportunities in the financial sector. The financial sector also plays a crucial role in mitigating climate-related risks of its clients, either through providing finance or insurance. A proper interaction between the finance and other sectors is thus needed.
India, being the fifth most vulnerable country to extreme weather events, faced loss of 0.36% per unit of GDP in 2018. It is, therefore, kept as the focus of this research.
This paper aims to understand the status of large companies of different sectors in India with respect to identifying, disclosing, and managing their climate-related risks and opportunities.
It also aims to understand the linkages between providers and recipients of finance in India with respect to climate-related risks. The methodology of this paper includes review of public reports of top 50 companies based on market capitalization to analyze disclosures on climate-related issues of both the recipients and providers of finance and analysis of gaps in linkages between these two groups. The analysis shows that there is a lack of quality disclosures on climate-related issues and in some cases, a lack of understanding about these issues is also seen. There companies in India have a narrow view of assessment of climate-related issues.
There are also many gaps present in the linkages between providers and recipients of finance. A proper disclosure-based interaction between the two groups is needed which can be achieved through policy guidelines.
Keywords: Climate-related risks, opportunities, financial impact, disclosures, TCFD
