ESG RISKS AND TAXONOMY Flashcards
What does TCFD mean?
the Taskforce on Climate-related Financial Disclosures
What does the materiality matrix show?
The anglo-saxon definition of materiality only encompasses financial materiality while the EU also takes into account impact materiality (aka double materiality)
Who was the Chairman of the Financial Stability Board (FSB)
Mark Carney
How does the EU consider the sustainability on each company?
A) The first condition is that they need to substantially positively affect their 6 objectives. ( how much impact is already predetermined with hard standards)
B) The second condition is that they need to not work against the 6 objectives ( meaning how much they harm the other objectives)
C) They comply with minimum social safeguards ( meaning that you need to be inclusive, pay good wages)
D) The last standard is that conditions A and B should be put to technical tests to ensure transparency and honesty when meeting the targets.
What is Shareholder theory?
The debate of the fiduciary duty to shareholders. meaning the company’s main objective is to create value and profit for the shareholders.
What is the EU appraoch to the Taxonomy?
depends how wide your scope is. You can focus on the climate transition, or you can see a broader scope going over Environment as a whole. Or you can look at sustainability as a whole through the ESG points as.
The Americans tend to focus on the smaller focus whilst the EU looks at sustainability as a whole.
What is the difference between social and societal?
Social: internal/individual interactions
Societal: external/larger structures or systems
What is global warming potential?
GWP at 100 years measures the effect of 1kg of gas on the climate over a period of a 100 years
What does GWP stand for?
Global Warming Potential
What unit is taken as reference for the GWP?
1 CO2
What is anthropogenic radiative forcing?
The influence anthropogenic climate factors have on radiant energy coming into Earth’s surface
What are two examples of anthropogenic radiative forcing?
Aerosols reflecting part of the solar radiation coming into Earth’s surface
Greenhouse gases retaining part of the solar radiation leaving Earth’s surface
What does NGFS mean?
Network for Greening the Financial System
When was NGFS first established?
December 2017
When did the ECB join the NGFS?
May 2018
When did the NYC State Dpt join the NGFS?
September 2019
How many members were in the NGFS by October 2021?
95 members and 15 observers
When did the NGFS publish its first comprehensive report?
April 2019
What took place in September 2021
FED and ECB research on climate stress testing
What events took place in 2015?
COP21
Paris Agreement
tragedy of the horizons speech
How does climate to finance risk transmission work?
Climate risks (physical & transition) have an impact on the economic transmission channels on a macro and micro level which then result in financial risks
How to take into account social factors in investment decisions
- determing most financially material/controversial factors
- asses how exposed companies are to these factors
- look for other relevant factors in the supply chain
What are some internal social factors?
- human capital development;
- health and safety;
- human rights;
- labor rights;
- freedom of association and employee relations;
- forced labor; and
- living wage.
What are some external social factors?
- stakeholder opposition / controversial sourcing;
- product liability/consumer protection;
- social opportunities; and
- animal welfare and antimicrobial resistance.
