C2 Risks and opportunities

Module Overview

Evaluating exposure to climate-related risks and opportunities over a range of time horizons allows for a strategy for the transition to a net-zero carbon economy recognized in the Paris Agreement and UN SDGs. This module focuses on processes for identifying, assessing, and responding to climate-related issues as well as on the climate-related risks and opportunities identified by your organization. This information helps investors to assess the potential impacts to valuations and the adequacy of the company’s risk response.

Many of the challenges you face when reporting on climate-related issues are common to other aspects of corporate reporting, requiring you to provide statements about your prospective condition. Some organizations, particularly accounting firms and their governing bodies, have published guidance about how to prepare statements that contain forward-looking information.

You may wish to consult with your financial, legal, and/or compliance departments for advice on your company’s general approach to the provision of forward-looking statements and information concerning risks.

Note that the questions relate to “inherent” risk and not the “residual” risk that remains after management measures have been taken into account.

Note for financial services sector companies:

The TCFD recommendations highlight the importance of the financial sector considering the impacts of climate-related issues in the context of their financing activities. When evaluating exposure to climate-related risks and opportunities, financial services sector companies should primarily consider the impact on their lending, financial intermediary, investing and/or insurance underwriting activities, in addition to operational activities.

Key changes

• Two removed questions:
  
  • [Financial services only] C-FS2.2d (2021) on portfolio exposure to water-related risks and opportunities.
  • [Financial services only] C-FS2.2e (2021) on portfolio exposure to forests-related risks and opportunities.
• New question: [Financial services only] C-FS2.2e requests information your organization considers about clients/investees as part of your due diligence and/or risk assessment process, and how this influences decision making.
• Modified questions:
  
  • [Financial services only] C-FS2.2b requests reasons why portfolio exposure is not addressed if it is not assessed.
  • [Financial services only] C-FS2.2c requests more granular detail on how your portfolio's exposure to climate-related risks and opportunities are assessed.
  • [Financial services only] C-FS2.2d (2021 C-FS2.2f) requests reasons why you do not consider climate-related information about your clients/investees as part of your due diligence and/or risk assessment process.
  • C2.3a – drop-down options for acute and chronic physical risk drivers and potential primary financial impacts have been revised.
• Two questions with additional guidance:
  
  • C2.1b and C2.2a now include example responses.

Click here for a list of all changes made this year.

Sector specific content

Additional questions for financial services sector companies.

Pathway diagram - questions

This diagram shows the general questions contained in module C2. To access question-level guidance, use the menu on the left to navigate to the question.