Climate Risk on the CFO Agenda
By Lars Aa. Loddesol, Group CFO Storebrand and Member of the A4S CFO Leadership Network
When CFO's meet we have traditionally talked about ROE, RORAC, Solvency, M&A, Regulation and other "hard" matters. Through A4S (Accounting for Sustainability), The Prince of Wales has established an arena where CFO's can meet to discuss how our companies impact the environment, how changes in the environment may influence our companies, and what we, as CFO's, can do to assess environmental risks and drive performance. Climate change threatens to undermine financial stability in the world, and therefore this issue falls naturally within the scope of CFOs, to report on our companies' environmental footprint, and the related risks and opportunities.
The financial markets are good at efficiently pricing risk. However, in order to do so, they need reliable and timely information. Currently there is a lack of information about climate related risk, and the information available is not standardized. It is our duty as CFO's to improve our own reporting on climate related risks and opportunities, and to share this with our investors and owners. Equally, it is our responsibility to demand similar information from the companies we invest in.
For Storebrand, Norway's largest private investor with some USD 100bn under management, our influence comes primarily from our ownership in companies around the world, and our active use of this ownership position. Since 1995, Storebrand has had a comprehensive sustainability agenda where we:
- Invest more in the companies that have a sustainable focus, with solutions to environmental challenges, and business models that will benefit from the transition to a green economy
- Engage in active ownership to create dialogue with the companies we invest in and to encourage strong ESG strategies, and
- Exclude companies that are denying or ignoring the risks related to climate change and other ESG criteria
The industry organization for the Norwegian financial industry, Finance Norway, has in cooperation with Storebrand, published a roadmap for green competitiveness. The roadmap emphasizes the need to integrate climate risks in company strategies, market analysis and investment decisions.
Reporting will not in itself save our planet. However, company transparency on sustainability risks is vital, if we are to channel financing in the right direction and move quickly to a sustainable economy. Climate related reporting is a motivation for change, and demonstrates that the business community contributes to solutions. For CFO's, there is nothing "harder" or more challenging than managing the largest risk of our time – climate change. What are you doing to speed up change?
To see more about Storebrand's reporting on Sustainability, check out our IR pages: https://www.storebrand.no/en/investor-relations