Course description
The course is designed to help professionals understand and manage the potential economic and operational impacts of sustainability and climate risks (SCRs) in their organizations. It is also designed to help candidates of the GARP Sustainability and Climate Risk (SCR™) Certificate prepare for the exam.
We will review the way climate risk impacts various economic agents from energy firms, investors and banks to insurance and reinsurance companies, manufacturers and distributors in supply chains. This workshop provides an overview of the “green” finance and trading markets created as a global response to climate change and will cover a wide range of financial products and instruments for financing sustainability and climate projects. We will review different initiative to price carbon, from a market and regulatory perspective.
We will discuss the main recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and see how different energy firms have adopted the framework to report climate risk exposures and guide portfolio management decisions.
The course also explores how to integrate SCR exposures in the Enterprise Risk Management Process, with focus on risk identification, measurement and management. We will also discuss effective design and applications of scenario analysis of climate change risks in the context of energy portfolios.
Case Studies for Energy Firms to illustrate key concepts will be introduced throughout the course.
The course builds on the selected readings by GARP SCR Certificate.
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Content
Session I: 3 hours
Foundations of Climate Change
- Introduction to Earth science systems: greenhouse effect, global warming, and climate change
- Carbon emissions, sequestration, greenhouse gas (GHG) scenarios, and tipping points
- Brief history and evolution of past and present climate accords
- Integrated Assessment Models (IAMs)
- Linkages between climate change risk and energy portfolios
Climate change Policy, Regulations and Ratings
- Sustainable Development Goals (SDGs)
- Environmental, Social, and Governance (ESG) reporting frameworks, scorings, and ratings
- Institutional Investors and Climate Change: Principles for Responsible Investment
- Case study: ESG investment guidelines in BlackRock vs. Goldman Sachs
- Principles for Responsible Banking
- Climate-related financial disclosures
- Greenhouse gas (GHG) emissions accounting and reporting principles
- Setting organizational and operational boundaries
- Case study: SCR criteria used by leading credit rating agencies
Session II: 3 hours
Green and Sustainable Finance: Instruments and Markets
- Climate finance trends, instruments and sources
- Understanding “Green” loans and sustainability-linked loans
- Guidelines for issuance and uses of green, social, and sustainability bonds.
- Trends in bond issuance for green markets. Alternative bond structures
- Case study: Starbucks Issue of first U.S. Corporate Sustainability Bond
- Climate finance and the current state of global climate flows
- Factors in implementing sustainability strategies
- Fundamentals of Trading and Pricing Carbon
- Carbon pricing: taxes, trading, credits, and leakage
Financial risk Management and reporting
- Financial impact of climate change
- Risks and opportunities as a result of climate change
- Preventable surprises and climate change action
- Physical risks – severity and/or frequency of extreme weather events
- Transition risks – Policy, legal, technology, markets and reputational risks
- Role of Competitors, Investors, Regulators, Customers and Supply Chains
- Identifying exposure to climate change-related financial risks
- Summary Recommendations of Task Force on Climate-related Financial Disclosures (TCFD)
- Climate Maturity Assessment and TCFD Gap Analysis
- Case study: Chevon TCFD disclosures
- Lessons learned and top recommendations
Session III: 3 hours
Enterprise Risk Management and SCRs
- Integration of SCR into the Enterprise Risk Management Process
- Organization’s governance around climate-related issues and opportunities
- Sustainability and climate risks and opportunities on the organization’s business, strategy and financial planning
- Bringing climate risks in the risk identification process
- Mapping climate risks into the organization’s performance
- Building a mindset for Climate Resiliency
- Active vs. Passive Management of SCR risks
- Climate Risk and Strategy: Linking physical and transitional climate risks linked to strategies, frameworks, and operations
- Case study: Analysis of disclosures by integrated energy firms
Scenario-based climate risk assessment and methodologies
- Considerations for applying scenario analysis
- Types of climate-related scenarios: Publicly available for industry and sectors (e.g. EIA) vs. company-specific scenarios
- Analytical Choices in Scenario Analysis: Selected Scenarios, Assumptions and Supporting data and models
- Designing effective climate-related scenarios for different time horizons
- Using Scenario Analysis in Disclosure of Climate-related Risks and Opportunities
- Case study: Climate risk management, scenarios and stress tests by AES
- ERM heat maps and applications to SCRs
- Case study: Scenario analysis for a transportation company
Sesssion IV: 3 hours
Current Issues in SCR for Energy Firms and Renewable Energy Finance
- Renewable portfolio standards (RPS) and impact on energy supply portfolios.
- Electricity market dynamics and increasing renewable penetration
- Emissions markets and Renewable Energy Credits (RECs)
- Renewables portfolios: Wind, solar, batteries
- Renewable energy Power Purchase Agreements (PPAs) and Virtual PPAs
- Case study: Microsoft’s Carbon Negative goal and comparison against Amazon’s initiatives
- COVID‐19 implications for climate change response
- Risks and opportunities in the transition to a low-carbon economy
- Integrated resource planning (IRP) incorporating renewables and batteries
- Case study: Glendale Water and Power finds a way forward to bring clean energy and meet local reliability