Global Framework For Climate Risk Disclosure
Global Framework for
Climate Risk Disclosure
A statement of investor expectations
for comprehensive corporate disclosure
October 2006
Introduction
A group of leading institutional investors from around the world released the Global Framework for Climate Risk
Disclosure—a new statement on disclosure that investors expect from companies—in October 2006. Investors
require this information in order to analyze a company’s business risks and opportunities resulting from climate
change, as well as the company’s efforts to address those risks and opportunities. The Framework encourages
standardized climate risk disclosure to make it easy for companies to provide and for investors to analyze and
compare companies.
The Framework consists of four elements of disclosure:1
✜ Total historical, current, and projected greenhouse gas emissions
✜ Strategic analysis of climate risk and emissions management
✜ Assessment of physical risks of climate change
✜ Analysis of risk related to the regulation of greenhouse gas emissions
The investors strongly encourage companies to apply this new Framework through existing reporting
mechanisms, including:
✜ Mandatory Financial Reports—The U.S. Securities and Exchange Commission as well as regulatory and
industry bodies in other countries require companies to disclose information of financial importance to the
company, and many companies now include climate risk information in their standard financial reporting.
✜ The Carbon Disclosure Project—The Carbon Disclosure Project (CDP) represents an efficient process
whereby many institutional investors collectively sign a single global request for disclosure of information
on climate risk. In 2006, CDP sent this request to over 2,000 companies. Its web site is the largest registry of
corporate greenhouse gas emissions in the world. The content of the Framework is consistent with CDP.
✜ Global Reporting Initiative—The Global Reporting Initiative (GRI) is a reporting system closely aligned
with CDP that issues Sustainability Reporting Guidelines for comprehensive reporting on the economic,
environmental, and social dimensions of corporate activities, products, and services. Using the GRI Guidelines,
companies can disclose significant information regarding their climate risk.
✜ Other Forms of Disclosure—Companies disclose forward-looking material information important to
investors through various methods, such as analyst briefings and sustainability reports. At the request of
investors, many companies have also prepared special reports on climate risk.
1. See pages 5-8 to view the complete Framework.
Global Framework for Climate Risk Disclosure
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The investors and collaborating organizations developed this Framework through a one-year Climate Risk
Disclosure Initiative. The investors will continue to discuss activities to enhance climate risk disclosure through
the communication networks of existing investor groups focused on climate change—the Institutional Investors
Group on Climate Change (IIGCC), the Investor Network on Climate Risk (INCR), and the Investor Group on
Climate Change. The investor groups will also continue discussions with two collaborating organizations—the
Carbon Disclosure Project and the Global Reporting Initiative—the leading voluntary efforts to standardize climate
risk disclosure and reporting worldwide. Climate risk disclosure is a burgeoning field, as companies, investors,
governments, and civil society increasingly understand the risks and opportunities that climate change poses for
companies and investors. The investor groups and collaborating organizations plan to meet periodically to discuss
developments in climate risk disclosure.
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Global Framework for Climate Risk Disclosure
Development of the Framework
In May 2005, 14 leading investors and other organizations worldwide launched a new effort to improve corporate
disclosure of the risks and opportunities posed by global climate change — the Climate Risk Disclosure Initiative.
The CRDI Steering Committee developed a draft Framework for climate risk disclosure, and circulated it for review
by investors, companies, financial analysts, and other experts. More than 50 reviewers have commented on the draft.
The Steering Committee amended its initial draft substantially as a result of that expert input.
The CRDI Steering Committee included representatives from:
✜ California Public Employees’ Retirement System
✜ California State Controller’s Office
✜ California State Teachers’ Retirement System
✜ Carbon Disclosure Project
✜ Ceres and the Investor Network on Climate Risk (INCR)
✜ Connecticut State Treasurer’s Office
✜ Global Reporting Initiative
✜ Institutional Investors Group on Climate Change
✜ Investor Group on Climate Change
✜ United Nations Environment Programme Finance Initiative
✜ United Nations Foundation
✜ United Nations Fund for International Partnerships
✜ Universities Superannuation Scheme
Investors created this global Framework in order to clearly communicate investor expectations about the
characteristics of successful corporate climate risk disclosure. They invited the CDP and GRI to participate since these
initiatives represented the most appropriate voluntary reporting frameworks for disclosing climate risk information.
Global Framework for Climate Risk Disclosure
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Climate Risk and Opportunities
Given the sweeping global nature of climate change, climate risk and opportunity is embedded in the operations
of all companies. Some companies with significant emissions of greenhouse gases or energy use face current or
future regulatory risks, while climate change may pose a range of physical or financial risks to other firms. These
risks may include operational risk, market risk, liabilities risk, policy risk, regulatory risk, and reputational risk. In some
cases, the risks to companies may be indirect. For example, even if a company is not directly subject to regulations,
significant emissions in its value chain may still result in increased costs (upstream) or reduced sales (downstream).
Climate change also represents significant opportunities for many firms. Some companies will develop profitable
new technologies or markets as governments pursue innovative strategies to address climate change and spur
technology development.
The Climate Risk Disclosure Initiative Steering Committee welcomes feedback on the Framework. For additional
information on the Framework or to offer feedback, please contact:
Paul Clements-Hunt
Chris Fox
Stephanie Pfeifer
Ian Woods
Head of Unit
Director, Investor Programs
Programme Director
Investor Group on Climate Change
UNEP Finance Initiative
Ceres / Investor Network
Institutional Investors Group
Senior Research Analyst,
15, Chemin des Anémones
on Climate Risk
on Climate Change
Sustainable Funds
CH-1219 Châtelaine, Geneva
99 Chauncy Street, 6th Floor
c/o The Climate Group
AMP Capital Investors
SWITZERLAND
Boston, MA 02111
Suite 4, 3rd Floor
50 Bridge Street
+41 22 917 8116
UNITED STATES
One Crown Square
Sydney NSW 1224
pch@unep.ch
617-247-0700 ext. 15
Church Street East
AUSTRALIA
fox@ceres.org
Woking
+61 2 9257 1343
Surrey GU21 6HR
ian.woods@ampcapital.com
UNITED KINGDOM
+44 1483 719 410
spfeifer@theclimategroup.org
Uses for the Framework
The investors supporting this Framework urge:
✜ Companies to use existing disclosure mechanisms to provide information that meets investors’ expectations
and serves their analytical needs.
✜ Securities regulators and governments to ensure that corporate climate risk disclosure in financial statements
adheres to the Framework.
✜ Other investors and financial analysts to insist that corporations disclose the information called for in the
Framework and then incorporate this information in their analysis.
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Global Framework for Climate Risk Disclosure
Global Framework for
Climate Risk Disclosure
While each sector and company may differ in its approach to disclosure, the most successful corporate climate
risk disclosure will be transparent and make clear the key assumptions and methods used to develop it. Companies
should directly engage investors and securities analysts in disclosing climate risk through both written documents
and discussions.
Investors expect climate risk disclosure to allow them to analyze a company’s risks and opportunities and strongly
encourage that the disclosure include the following elements:
1 Emissions—As an important first step in addressing climate risk, companies should disclose
their total greenhouse gas emissions. Investors can use this emissions data to help approximate the
risk companies may face from future climate change regulations.
Specifically, investors strongly encourage companies to disclose:
✜ Actual historical direct and indirect emissions since 1990;
✜ Current direct and indirect emissions; and
✜ Estimated future direct and indirect emissions of greenhouse gases from their operations, purchased
electricity, and products/services.2
Investors strongly encourage companies to report absolute emissions using the most widely agreed upon
international accounting standard—Corporate Accounting and Reporting Standard (revised edition) of the
Greenhouse Gas Protocol, developed by the World Business Council for Sustainable Development and the World
Resources Institute.3 If companies use a different accounting standard, they should specify the standard and the
rationale for using it.
2. These emissions disclosures correspond with the three “scopes” identified in the Greenhouse Gas Protocol Corporate
Accounting and Reporting Standard (revised edition) developed by the World Business Council for Sustainable Development
and the World Resources Institute. Scope 1 includes a company’s direct greenhouse gas emissions; Scope 2 includes emissions
associated with the generation of electricity, heating/cooling, or steam purchased for a company’s own consumption; and
Scope 3 includes indirect emissions not covered by Scope 2. More information is available at http://www.ghgprotocol.org.
3. Available at http://www.ghgprotocol.org.
Global Framework for Climate Risk Disclosure
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2 Strategic Analysis of Climate Risk and Emissions Management—
Investors are looking for analysis that identifies companies’ future challenges and opportunities
associated with climate change. Investors therefore seek management’s strategic analysis of climate risk,
including a clear and straightforward statement about implications for competitiveness. Where relevant,
the following issues should also be addressed: access to resources, the timeframe that applies to the risk,
and the firm’s plan for meeting any strategic challenges posed by climate risk.
Specifically, investors urge companies to disclose a strategic analysis that includes:
✜ Climate Change Statement—A statement of the company’s current position on climate change,
its responsibility to address climate change, and its engagement with governments and advocacy
organizations to affect climate change policy.
✜ Emissions Management—Explanation of all significant actions the company is taking to minimize
its climate risk and to identify opportunities. Specifically, this should include the actions the company
is taking to reduce, offset, or limit greenhouse gas emissions. Actions could include establishment of
emissions reduction targets, participation in emissions trading schemes, investment in clean energy
technologies, and development and design of new products. Descriptions of greenhouse gas reduction
activities and mitigation projects should include estimated emission reductions and timelines.
✜ Corporate Governance of Climate Change—A description of the company’s corporate governance
actions, including whether the Board has been engaged on climate change and the executives in charge
of addressing climate risk. In addition, companies should disclose whether executive compensation is tied
to meeting corporate climate objectives, and if so, a description of how they are linked.
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Global Framework for Climate Risk Disclosure
3 Assessment of Physical Risks of Climate Change—Climate change is
beginning to cause an array of physical effects, many of which can have significant implications
for companies and their investors. To help investors analyze these risks, investors encourage companies to
analyze and disclose material, physical effects that climate change may have on the company’s business
and its operations, including their supply chain.
Specifically, investors urge companies to begin by disclosing how climate and weather generally affect their
business and its operations, including their supply chain. These effects may include the impact of changed
weather patterns, such as increased number and intensity of storms; sea-level rise; water availability and other
hydrological effects; changes in temperature; and impacts of health effects, such as heat-related illness or
disease, on their workforce. After identifying these risk exposures, companies should describe how they could
adapt to the physical risks of climate change and estimate the potential costs of adaptation.
Global Framework for Climate Risk Disclosure
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4 Analysis of Regulatory Risks—As governments begin to address climate change by
adopting new regulations that limit greenhouse gas emissions, companies with direct or indirect
emissions may face regulatory risks that could have significant implications. Investors seek to understand
these risks and to assess the potential financial impacts of climate change regulations on the company.
Specifically, investors strongly urge companies to disclose:
✜ Any known trends, events, demands, commitments, and uncertainties stemming from climate change
that are reasonably likely to have a material effect on financial condition or operating performance. This
analysis should include consideration of secondary effects of regulation such as increased energy and
transportation costs. The analysis should incorporate the possibility that consumer demand may shift
sharply due to changes in domestic and international energy markets.
✜ A list of all greenhouse gas regulations that have been imposed in the countries in which the company
operates and an assessment of the potential financial impact of those rules.
✜ The company’s expectations concerning the future cost of carbon resulting from emissions reductions
of five, ten, and twenty percent below 2000 levels by 2015. Alternatively, companies could analyze
and quantify the effect on the firm and shareowner value of a limited number of plausible greenhouse
gas regulatory scenarios. These scenarios should include plausible greenhouse gas regulations that are
under discussion by governments in countries where they operate. Companies should use the approach
that provides the most meaningful disclosure, while also applying, where possible, a common analytic
framework in order to facilitate comparative analyses across companies. Companies should clearly state
the methods and assumptions used in their analyses for either alternative.
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Global Framework for Climate Risk Disclosure
