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Principles for Responsible Investments (PRI) Climate Forum: Equinor and Storebrand conduct a common case study on climate risk

Published 27.11.2018 by Sunniva Bratt Slette

Climate change is considered to be the most important environmental, social and governance (ESG) factor influencing the portfolios of companies that are signatories to the UN Principles for Responsible Investments (PRI). A better understanding of climate-related risks and opportunities helps both companies and investors to improve their practice. Equinor and Storebrand accepted the PRI challenge and prepared a common case study investigating the framework linked to climate-related risks in financial reporting (the TCFD framework). 

The TCFD framework was established after the Paris Agreement by the Financial Stability Board, an international body that monitors and makes recommendations regarding the global financial system. The work group published its recommendations in 2017 in order to help the financial sector include climate-related risks in financial reports. The TCFD requires companies to provide relevant information across the following four sections: Governance, Strategy, Risk Management and Metrics & Targets. 
 

"Increased transparency makes markets more efficient and the financial system more stable and capable of resistance".

– Michael Bloomberg, head of the Task Force on Climate-related Financial Disclosures (TCFD)

 

In accordance with the TCFD framework

In dialogue with PRI, the energy company Equinor and investor Storebrand decided to conduct a common case study on TCFD implementation.  The objectives of this were: (1) to demonstrate how the existing reporting of a company (Equinor) was adapted to the TCFD guidelines and to identify possible improvements, (2) to point out areas that the sector as a whole could further improve, and (3) to show how an investor (Storebrand) uses such information in an investment analysis. The case study is based on Equinor's 2016 annual report and sustainability report and an update on the capital markets' sustainability in February 2017. Equinor and Storebrand found that the reports were to a large extent in compliance with the TCFD framework. Some improvement areas for future reports were also identified in order to ensure further adaptation to the TCFD recommendations. 

Both Equinor and Storebrand are among the 513 organisations and companies that expressed their support for the TCFD at the One Planet Summit in New York on 26 September 2018. 

The study is available from the TCFD Knowledge Hub, a website established by the Climate Disclosure Standards Board (CDSB). The TCFD Knowledge Hub provides information intended to facilitate climate-risk reporting. With a goal of helping companies to implement the TCFD recommendations, the website provides an overview of publicly available tools, case studies, resources, guidance and events relating to climate risk. 

Main findings

The case study findings encourage further discussion and work relating to the following issues, with reference to the report 

  • Metrics & Targets: how to contribute to more standardised, quantifiable indicators, instead of text
  • Use of scenarios: how to present and use extremely uncertain future-oriented information 
  • Reporting format: how to use the TCFD guidelines without separating climate risk from company risk
  • Materiality: how to ensure flexibility regarding the reporting of non-material information
  • Implementation of suitable objectives: how to balance the desire for detailed information with the ability to adapt and comparability across sectors and geographical areas
     

Presentation at the PRI Climate Forum

Equinor and Storebrand presented the case study at the PRI Climate Forum in Amsterdam on 22 November and in London on 26 November. As part of the active ownership topic "Engagement on Climate-related Issues", Equinor and Storebrand discussed the process and the results of the case study. Investors from international markets were included in the discussion to exchange experiences of TCFD implementation. The PRI members appeared to agree that the road towards reporting in accordance with the TCFD framework will continue both individually and through collaboration, for example via forums such as the TCFD Knowledge Hub. 
 

These are the PRI

The UN PRI (Principles for Responsible Investments) consist of a set of six principles developed by investors, for investors. Companies that comply with the principles, such as Equinor and Storebrand, make the following commitments:
 

Principle 1

We will incorporate ESG issues into investment analysis and decision-making processes
 

Principle 2

We will be active owners and incorporate ESG issues into our ownership policies and practices
 

Principle 3

We will seek appropriate disclosure on ESG issues by the entities in which we invest
 

Principle 4

We will promote acceptance and implementation of the principles within the investment industry
 

Principle 5

We will work together to enhance our effectiveness in implementing the principles
 

Principle 6

We will each report on our activities and progress towards implementing the principles


 

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