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Climate Transition Risk Management

Marsh Asia’s bespoke Climate Transition Risk Management solutions help companies in the region identify and mitigate the array of risks in their decarbonisation journeys, with relevant and applicable outputs to drive TCFD reporting and strategic decision making.

Risk prioritisation

Create a comprehensive climate risk register to identify your company’s most material transition risks for strategic communications and decision-making.

Asset evaluation

Calculate stranding risk, discover the gap between your current emissions versus net-zero targets, and establish a suitable carbon emissions reduction pathway.

Financial assessment

Quantify the financial impact of transition risks on your key business lines to facilitate climate disclosure and reinforce business case for your decarbonisation journey.

You cannot escape climate transition risks, no matter what industry or sector your business is in.

Governments across Asia are implementing climate reporting guidelines, statutory requirements, and carbon pricing mechanisms in response to climate change. Your company now faces an array of transition risks — regulatory, market, technology, and reputational risks — that need to be assessed and managed, including:

  • Restricted access to financing and insurance capacity due to inadequate actions toward achieving net-zero targets and climate disclosure reporting (e.g. TCFD).
  • Potential loss of revenue and supply chain disruption as your clients/vendors pivot and prioritise doing business with companies that meet specific climate and carbon-reduction goals.
  • Emergence of lower carbon alternatives or technologies that may impact your bottom line and erode competitive advantage.
  • Litigation brought by stakeholders and/or penalties because of failure to reduce carbon emissions.

Amid a constantly evolving regulatory environment and stakeholder expectations, how should your company begin to mitigate transition risks and calibrate a climate strategy aligned to your business objectives? Key to achieving this is to adopt a robust transition risk management approach to ensure risks are comprehensively evaluated with actionable insights — including outputs required for TCFD reporting and integration with your Enterprise Risk Management (ERM) strategy.

Turn your climate transition risk mitigation efforts into business success with Marsh Asia 

A robust climate transition risk management approach can translate your business’s transition efforts into immense value. Backed by a global team of Climate & Sustainability experts, Marsh Asia’s Climate Transition Risk Management approach comprises three detailed qualitative and quantitative solutions, which can be applied respectively based on your company’s needs and objectives. Each solution empowers you with insights to support your business’s decarbonisation journey while meeting disclosure requirements:

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Objective: Create a climate risk register to identify the most material transition risks for strategic communications and decision-making.

Marsh conducts whole-of-business profiling — including identification of transition risk trends specific to your industry — to create a risk register outlining the probability and potential impact of each risk on your business lines and products as well as the governance actions and controls required. Risks on business lines may include changes in regulatory stringency, technological advances, and supply chain disruption. The profiling results can be integrated into annual reports and investor communications.

Case study: After helping an Asian minerals business identify relevant transition risks and trends, Marsh Asia created a climate risk register that evaluated these risks on a probability-versus-impact basis. By identifying the most material transition risks to the company’s business lines and products, the register aided the company in developing a sustainability reporting framework and provided a clear roadmap for managing transition risks, which was commended by financial sponsors in capital raising and refinancing discussions. 

Objective: Calculate stranding risk, show the gap between current emissions versus net-zero targets, and recommend suitable carbon emissions reduction pathway.

Marsh Asia tailors risk assessment tools such as the Carbon Risk Real Estate Monitor (CRREM) tool to your company’s assets and geographical locations to calculate stranding risk based on carbon emissions, taxes, and energy prices. The results, which show the gap between your current emissions versus net-zero targets, can be integrated into the overall picture of risk across the business and help you derive an achievable carbon emissions reduction target for your company.

Case study: Upon discovering that a majority of the assets in one of its country funds will be stranded by 2035, a global asset manager made the informed decision to direct investment into the assets at risk and raise its current 10% emissions reduction target after Marsh Asia found that the current target was insufficient to mitigate asset stranding risk.

Objective: Quantify the financial impact of transition risks on key business lines under various scenarios to facilitate climate disclosure and reinforce business case for the decarbonisation journey.

Using a comprehensive top-down and bottom-up approach spanning seven risk categories — reputation, market, policy, liability, technology, investor, physical — Marsh translates global and sectoral scenarios into tangible risk implications and calculates the financial impacts of various scenarios on the balance sheet of your key business lines based on agreed-upon assumptions and time horizons.

Case study: With the help of Marsh Asia, a power generation company identified that its financial exposures to transition risks were primarily driven by four key risk categories. An in-depth analysis into market risk uncovered insights — such as potential loss of revenue due to shifts in consumer preferences — and generated actionable recommendations that allowed the company to take advantage of business and cost-saving opportunities beyond risk mitigation measures, while giving them the outputs required for TCFD reporting.

Choose a proven climate transition risk management approach

With proven expertise in helping companies manage their climate transition risks across Asia and worldwide, Marsh Asia can help you calibrate a carbon emissions reduction pathway by leveraging advanced asset assessment tools, profiling your business by creating a comprehensive climate risk register with actionable insights, and assessing the financial impact of transition risks on your balance sheet in alignment with climate disclosure requirements and stakeholder expectations.

Let us empower your decarbonisation journey with confidence and foresight.

Schedule a non-obligatory chat with our Climate Change and Sustainability advisory specialist and discover how your organisation can benefit from Marsh Asia’s Climate Transition Risk Management solutions.