Carbon Trust’s ‘Science Based Targets initiative’ (SBTi) recently finished public consultation of a draft revision to its Corporate Net Zero Standard – a benchmark for many corporates to date – and their Head of Corporate Partnerships and Growth examines the implications and the fine line that exists between pragmatism in corporate decarbonisation and safeguarding long-term reductions.
Polly MacCarthy writes for Carbon Trust:
Through our SBTi insight series, we explore the implications of the proposed changes, potentially new expectations and how to improve the traceability of emissions across your value chain. Financial institutions face an ever-evolving regulatory landscape, causing many to feel unsure of how to proceed with risk disclosures. Building on a solid climate risk assessment, rather than templates and formatting, will put your organisation in a far better position to comply with current requirements and adapt to future changes. Three principles to get your climate risk assessments right
We share three principles to get the fundamentals right.
In this dynamic landscape, the smartest organisations are those that focus on three core principles:
- Stay informed, but don’t get obsessed with the regulations: Understand the evolving regulatory landscape, from the PRA’s tightening requirements to international disclosure standards, but avoid getting lost in chasing compliance templates. The focus should be on substance over form, recognising that strong climate risk management naturally aligns with regulatory demands.
- Build climate risk assessments that drive decision-making: Regardless of the methodology or data constraints, your climate risk assessment should be practical and valuable. It needs to inform governance, shape strategy, guide portfolio management, and support day-to-day risk management, not sit in a silo. Getting the fundamentals right enables institutions to navigate uncertainty while maintaining operational resilience.
- Connect climate risks to core financial metrics: The most effective climate risk assessments translate climate insights into financial impacts, particularly on credit risk, liquidity, solvency, capital adequacy, and profitability. Financial institutions should focus on integrating climate considerations directly into existing risk frameworks, stress testing, and capital planning. This bridges the gap between sustainability narratives and concrete financial decision-making.
Regulations may change in the future, but your preparedness doesn’t have to. Whether the PRA adjusts its expectations or the UK SRS introduces new requirements, a strong climate risk assessment remains your best safeguard.
Get in touch to assess your resilience… by going to the following link: https://www.carbontrust.com/contact
