In the era of extreme weather, how important is it to build a complete climate risk database?
On the 23rd, Fubon Financial Holdings, Fubon Culture and Education Foundation and National Taiwan University Risk Center held the “Fubon Sustainable Future Forum”. The first forum was chaired by Zhang Jingzhen, a researcher at the Institute of Economics of the Academia Sinica, and Qiu Shuzhen, vice chairman of the Financial Management Commission, explained Green Finance 3.0 Tung Ching-bin, a professor of the Department of Bioenvironmental Systems Engineering at National Taiwan University, analyzed the quality and application of the climate change database.
At the same time, Lin Quanxing, executive deputy general manager of KPMG Anhou Sustainable Development Consulting Co., Ltd., an advanced industry leader, and Guo Beiting, general manager of Taipei Fubon Bank, were invited to share the integration, analysis, and conviction of data disclosure, as well as the contribution of the financial industry to green transformation.
The Financial Regulatory Commission has been promoting “green finance” since 2017, and released the “Green Finance Action 3.0 Plan” in September last year (2022), requiring all financial institutions to adopt the four major aspects of climate-related financial disclosure (TCFD) “governance, Based on “strategy, risk management, indicators and goals”, incorporate climate risk into the existing risk management procedures, hoping to achieve the vision of “integrating financial resources to support net zero transformation”.
Public-private collaboration to integrate resources and build a climate risk database
Qiu Shuzhen emphasized that climate change brings “transition risks” related to the low-carbon economy and “physical risks” that affect the climate and environment. By promoting Climate Change Financial Disclosure (TCFD), risks are transformed into financial impacts, impacts and opportunities are analyzed scientifically and data-based, and companies are guided to set goals and carry out risk management. The FSC has also launched a sustainable financial assessment to help financial industry players understand risk management projects and priorities.
The FSC has been promoting green finance for many years, with the main targets being the financial industry and listed counter companies. Assets in the financial industry come from loans and investments in various industries. Changes in corporate assets are both risks and opportunities for the financial industry. Second, listed counter companies play a leading role, leading the industry chain to manage carbon emissions, and disclose relevant information in annual reports and sustainability reports. After being confirmed by a third party, the FSC will finally integrate the information.
In addition to the stock exchange’s corporate ESG data platform and the Ministry of Economic Affairs’ carbon emission estimation tool for small and medium-sized enterprises, the Financial Supervisory Commission has also actively integrated data from the National Disaster Prevention Technology Center and various ministries and commissions to establish a climate risk database. However, she bluntly stated that Taiwan is currently facing problems such as insufficient public information and different formats of information definitions. In the future, it will formulate standards that meet financial industry regulations and are consistent with international standards, and make them transparent and open for public use.
“The time for carbon reduction is urgent. Whether it is indecision or advanced deployment, time is always passing,” Qiu Shuzhen believes that public and private cooperation, turning goals into actions is the solution to achieve net zero emissions.
Climate change is not just about disaster prevention, five steps to build a climate database
Having studied climate change for more than 30 years, Tong Qingbin emphasized the importance of “knowledge management”. The accuracy and transparency of data will affect the integration of national information systems. If the reliability is low or the benchmarks are different, they cannot be compared, let alone used as a reference for decision-making.
Tong Qingbin gave an example that there is little difference in rainfall in Taipei, but the degree of flooding is quite different. “Different industries need different data, and knowledge also needs to be value-added.”
With the frequent occurrence of extreme weather, Tong Qingbin believes that facing climate change is not only about disaster prevention, but also situational analysis and risk prediction under climate change. He explained that summarizing past experience and proposing changes in the next five years is “disaster prevention”, while “climate change adaptation” has no experience to follow, and requires scientific assessment of physical risks. However, Taiwan currently does not have an integrated national database.
Talking about establishing a climate risk database, Tong Qingbin listed five major steps. First, data definitions need to be clear and scientifically based. Next, information standards must be consistent, complete, and finally international in order to meet the needs of international trade. With a common database, the Financial Supervisory Committee will have a basis to check the accuracy of the data.
Tong Qingbin reminded that when external information enters industries and systems, information security issues will also surface, and precautions must be taken.
Investigation reveals the status of climate risk disclosure, TNFD is the next mountain
KPMG conducted a survey on the 2022 Global Corporate Sustainability Report, and the results showed that 34% and 67% of the top 100 companies in the world and Taiwan respectively introduced the TCFD framework in their sustainability reports, a significant increase compared to 2020. Among them, Taiwan’s technology, media and telecommunications industry, financial services industry and chemical products industry have the highest acceptance.
Lin Quanxing shared the current situation of climate risk disclosure of Taiwanese companies, and found that the key gap lies in the lack of a climate risk governance structure, and how to incorporate the results of scenario analysis and financial quantitative analysis into the company’s goal setting. Lin Quanxing believes that the climate change risk database not only helps companies avoid risks, but also hides green opportunities.
On the other hand, Lin Quanxing pointed out that the international trend is expanding from TCFD to nature-related financial disclosure (TNFD). More than half of the world’s GDP and an economic value of about US$44 trillion are moderately or heavily dependent on nature and ecosystems, which may trigger a series of climate and environmental chain effects. In September this year, the United Nations will officially announce the final proposal framework of TNFD. Lin Quanxing called on enterprises to prepare as soon as possible.
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Tags: Climate risk knowledge managementAppeal industry officials academia Establishing climate database urgent Chunmin ESG Vision
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