Over the last few years, we've seen a lot of activity from businesses to develop their climate risk frameworks and net zero strategies, with regulators and standards setters playing a big role in shaping firms' efforts.

But as firms increasingly embed climate risk and net zero into their day to day operations over the next 12-18 months, what will be some of the key things that they will need to address?

We believe that there will be four specific themes that firms will be grappling with.

There are 4 specific themes that stand out in embedding your climate agenda, and where we continue to hear from our clients within the industry.

First, embedding climate risk and net zero within your organisation. This is about really weaving climate considerations throughout all your key decision-making processes. We have worked with many clients around the word on their climate risk and net zero programmes, and will be sharing our perspectives over the coming weeks on five most important things to get right.

Second, Climate training. We can already see a profound impact on organisations' strategy's and operating model. A rapid response is required to address the challenges associated with this, and realise climate change opportunities. Training is a key pillar of this adaptation. Individuals and teams will need to have the required skills and knowledge to adequately manage risk, provide advice and engage with their clients going forward.

The third is anticipating the political drivers of transition. Transition will be driven by government policy change, and so the ability to anticipate this potential policy change early will be critical to your ability to navigate climate risks. But it will also be key to being on the front foot with identifying opportunities to finance transition. It is those firms who can identify opportunities early who will be able to generate the highest returns from financing transition. To illustrate this ability to read the political tea leaves - and how it can shape your climate risk and net zero strategy - we will be sharing some of our political transition risk analysis throughout the year.

And finally, it is becoming more important for firms to realise their biodiversity risk. Our economic system is reliant on biodiversity, and preserving it is crucial for the successful transition to a sustainable economy. The financial sector has a key role to play in this as it has the power to influence and foster activities that will have a positive impact on the environment. Additionally, biodiversity is following a similar journey to climate, but at an accelerated rate. Organisations that put biodiversity on their agenda now will be better prepared, particularly with nature-related disclosures expected for 2023.

Financial services institutions increasingly need to ingrain climate and biodiversity risks across all levels and functions in the organisation. Education is crucial to empower your people to succeed, as well as understanding the political drivers. At Baringa, we are passionate about building a future that is sustainable - we've been supporting our clients in this space for decades, and as a global leader on the energy transition, we can help you navigate the complex world of climate change and sustainability to deliver your net zero ambitions and drive positive impact.

Originally published Sep 8, 2022

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