Navigating Climate and Environmental Risks

The Importance of CR&E Risk Management

Regulatory and stakeholder expectations regarding CR&E risk management are rapidly increasing. Demonstrating robust consideration of these risks is now a critical requirement for investors and regulators alike. There are three primary drivers:

1. Central Bank of Ireland Supervisory Priority 5: Climate Change and Net Zero Transition

• Integration of climate change and sustainability considerations into business planning and strategy.
• Adequate assessment of the materiality of climate risk exposures, including physical and transition risks.
• Mitigation of risks related to greenwashing.

2. Individual Accountability Framework Prescribed Responsibility 24 (PR24)

Responsibility for managing financial risks from climate change must be formally assigned to an individual holding a PCF role by July 2024 (for in-scope firms).

3. Disclosure Reporting Intensification

Increasing regulatory and investor expectations for enhanced transparency through disclosure reporting may make disclosure reporting mandatory to facilitate investment decisions.

Risks of Inadequate CR&E Consideration

Failing to adequately consider CR&E risks can lead to significant consequences, including:

• Not meeting regulatory or stakeholder expectations, resulting in reputational damage.
• Regulatory intervention and unforeseen losses due to transition and physical risk events.

How Forvis Mazars Can Assist

Forvis Mazars offers comprehensive CR&E risk assessments tailored to your organisation's sector, size, and operating model. Our CR&E Risk Assessment Framework includes key categories and assessment questions:

Business Model and Strategy:

Has the organisation assessed potential CR&E risk impacts over the short, medium, and long term?

• Are these impacts integrated into strategy development and business decisions?
• Governance and Risk Appetite:
• Is governance and oversight of CR&E risk well-structured with appropriate reporting?
• Has the risk appetite regarding CR&E risk and supporting metrics been defined?

Risk Management:

• Is CR&E risk integrated into the overall risk management framework?
• Has scenario analysis or stress testing been conducted to determine the impact of CR&E risk?

Disclosures:

• Has the quality of CR&E disclosures been critically assessed and is the development process well-documented?
• Has a readiness assessment for future voluntary or mandatory disclosures been completed if disclosures have yet to be produced?

Data:

• Have organisational CR&E data requirements been identified?
• Is there a plan to enhance the data quality used for CR&E analysis?

We can identify gaps and provide recommendations tailored to your needs. We can also develop a roadmap to support implementing these recommendations if necessary. If you would like to discuss your organisation’s approach to CR&E risk management, please contact Liam McKenna.