Eric Seo & Alistair Marsden

Question 1

1 January 2023 entities were required to disclose

Answer 1

according to the standards set for periods starting on or after this date

Question 2

The NZ Climate Related Disclosures (CRD) apply to

Answer 2

NZX-listed entities, banks/credit unions/building societies, investment scheme managers, insurers

Question 3

27 October 2024 additional requirements were added for

Answer 3

mandatory GHG assurance requirements

Question 4

4 Elements of Climate Reporting

Answer 4

Governance
Strategy - scenario analysis, risk identification, anticipated impacts
Risk Management
Metrics and Targets - measurement and reporting

Question 5

Scenario Analysis

Answer 5

must describe the scenario analysis undertaken to help identify climate related risks and opportunities

Question 6

Scenario Analysis helps to

Answer 6

better understand the resilience of its business model and strategy

Question 7

Risks

Answer 7

Physical - what are the physical risks of climate change?
Transition - what are the risks associated with transition to a low emissions economy?
Climate Related Opportunities - what are the potential positive outcomes?

Question 8

3 scenarios often used

Answer 8

Net Zero 2025 - 1.5 degree warming trajectory
Current Policies - uncontrolled warming of 3+ degrees
A third-climated related scenario made up

Question 9

Scope 1 Emissions

Answer 9

Direct - owned and controlled emissions directly from operations

Question 10

Scope 2 Emissions

Answer 10

Indirect - from purchased electricity, steam, heating or cooling

Question 11

Scope 3 Emissions

Answer 11

Indirect - emissions from the supply/value chain

Question 12

Calculation of Emissions =

Answer 12

activity data x emission factor

Question 13

Climate Related Risks in Financial Statements - Entity

Answer 13

Are they operating in a high-risk environment?
Do they have operations in other climate reportig countries?

Question 14

Climate Related Risks in Financial Statements - Management

Answer 14

Has leadership considered climate risks?
Do they have SLL’s or green bonds?
Any public metrics, targets or commitments?

Question 15

Climate-Related Risks in Financial Statements - Indicators of Physical risk

Answer 15

Risks for flooding, drought, etc?
Any insurance claims against climate matters? Increased premiums?
Is the supply chain effected by climate?

Question 16

Climate-Related Risks in Financial Statements - Indicators of Transition risk

Answer 16

Government plans to reduce emissions?
Changing consumer preferences?

Question 17

Reliability of ESG Scores

Answer 17

Low correlation between ESG scores from different providers - 0.54

Question 18

Do companies with higher ESG score have lower cost of capital and hence, higher shareholder value?

Answer 18

No, there is an association but no necessarily causation

Question 19

Until carbon price risk is fully priced in the market…

Answer 19

we may observe a period where low co2 firms have lower cost of capital and higher returns - equilibrium will be reached when high co2 firms have higher cost of capital and higher forward looking returns

Question 20

Project NPV =

Answer 20

-investment + sum of (revenue - costs - (carbon price x GHG emissions))/(1+ discount rate)