Managing the transition: TCFD roadmap for an energy business

The challenge

A large energy company in Latin America wanted to continue growing its gas production business while at the same time becoming a leader in its commitment to the environment, communities, and corporate governance. A major step toward this goal was to ensure the comprehensive integration of the recommendations of the Task Force on Climate-Related Financial Disclosures into its enterprise risk management (ERM) system and publish its first TCFD report on managing climate-related financial risks.

The solution

Marsh’s Advisory team worked with the company to develop an approach with four critical components that included assessment of the current state, quantifying risk exposures, and developing the company’s first TCFD report:

TCFD gap analysis and roadmap development included a review of business and governance documentation and processes; stakeholder interviews; the launch of a climate-risk identification process; and a roadmap to achieving TCFD alignment.
Physical risk assessment included development of a climate risk register, with TCFD taxonomy built in; benchmarking of key risks and assessment of physical risks; and a shortlist of exposed sites.
Transition risk assessment included data review to prepare for modelling; sector-specific economic research; short- and long-term transition risk scenarios; and qualitative analysis of potential impacts.
TCFD report development included review of peer reports; production of a draft report for review; identification of suitable data and graphics to visualize key messages; refinement of the report based on stakeholder input; and data documentation for auditability.

The results

Working with Marsh Advisory, the company developed a roadmap to achieve TCFD alignment, including gap analysis with identification of improvement areas to progress TCFD readiness; a climate risk register with top physical and transitional risks identified; and its first TCFD report detailing their understanding and management of climate-related risks, and the integration of these into their governance and risk management processes