- Initiate discussions on monitoring and assuring climate change preparedness between directors, risk managers, and internal audit teams.
- Utilize leadership roles, especially within Audit Committees, to shape the assurance process and guide internal audit focus towards climate risks.
- Request internal audits to conduct a climate risk assessment, examining the company’s mission, long-term strategies, governance structures, and both financial and non-financial stakeholder communications.
- Plan internal audits to scrutinize climate-related commitments and actions, ensuring the processes and controls supporting this data are effective and reliable.
- Anticipate the tangible impacts of climate change and new sustainability regulations, leveraging expertise from risk managers and internal auditors.
- Prepare for compulsory climate-related financial disclosures, such as the Task Force on Climate-Related Financial Disclosures (TCFD) reporting, mandated for FCA-regulated organizations from 2022.
Carolyn Clarke, CEO of Brave Consultancy and contributor to the CIIA report, stresses the necessity for directors, in collaboration with internal audit and risk managers, to be proactive in tackling climate risk. She highlights the importance of internally identifying, managing, and reporting climate and environmental risks rather than relying solely on external audits. With the pressing nature of climate change, particularly in light of events like COP26, Clarke advocates for climate risk management to be a strategic and integral part of business processes. She encourages directors to build confidence in their climate risk assessments and to ensure that non-financial data is as reliable as financial information, given its significance to investors and other stakeholders.
Clarke advises businesses to start by aligning their strategies with TCFD reporting guidelines, ensuring governance, risk, and control processes are in place to support confidence in climate change management. Despite future developments in reporting frameworks, Clarke urges directors not to delay in objectively overseeing and reporting on climate responses.
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