Accounting for Climate Risk and Opportunity


Climate risks and opportunities are a focus of risk managers around the world. A key challenge has been gathering CO2 emissions data. Emissions data is critical to determine a company’s exposure to transition risks and opportunities as the world moves toward Net Zero emissions. Whether under taxation programs or cap and trade programs, we believe emitters will face rising emission costs, and competitors with low emissions technologies and surplus emission certificates will be presented with new opportunities.

Companies face increasing pressure to disclose their emissions so that investors can appraise the risks and opportunities. In November last year, the International Financial Reporting Standards Foundation (IFRS) announced the establishment of an International Sustainability Standards Board (ISSB).[1]

This standard-setting board, like the International Accounting Standards Board (IASB), the IFRS’ other standard-setting board, will provide globally recognized standards for climate disclosure. Data, even when standardized, requires context, and that is one reason Pembroke supports the Task Force on Climate-Related Financial Disclosures (TCFD)

The TCFD was established by the Financial Stability Board in December 2015 to identify information needed by financial market participants to appraise climate-related risks and opportunities.[2] The TCFD’s recommendations are for companies to disclose climate-related risks and opportunities in a framework that includes four areas: Governance, Strategy, Risk Management, and Metrics and Targets. The metrics and targets include the company’s emissions and their future targets for emissions.

Recently, Pembroke has been able to gather emissions estimates from data providers like Bloomberg for the emissions of most of our holdings. We have also been contacting companies to discuss the estimates with them and their emissions strategies. In December 2021, Pembroke wrote to all our holdings and asked them three questions:

  1. Does your company currently report its climate-related financial risks or opportunities?
  2. Does the development of such reporting consider the TCFD’s recommendations and framework?
  3. If you do not currently report your climate-related financial risks and opportunities, would your firm commit to reporting climate-related financial risks and opportunities by 2022, 2023 or 2024?

Respondents to the questionnaire provided a range of answers. Roughly a quarter of respondents said they would be reporting on climate-related financial risks or opportunities in 2022, a number of these had already been reporting this information. An additional 5% said they planned to report by 2023. About 70% of respondents acknowledged the importance or providing climate-related financial risk and opportunity information but did not provide a specific year by which they planned to include it in their reporting.

Climate risk and opportunity exists in all sectors. Pembroke’s outreach is part of our effort to better understand the exposure, awareness, and preparedness of our holdings for climate-related risks and opportunities. It is also part of our stewardship activity to communicate the importance of this subject to the senior leadership of the companies in which we invest, and to our investors who are the ultimate owners of those companies.


[1] Source: See News and Events, 03 November 2021

[2] Source: FSB TCFD website. See:



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This report is for the purpose of providing some insight into Pembroke and the Pembroke funds. Past performance is not indicative of future returns. Any securities listed herein, are for informational purposes only and are not intended and should not be construed as investment advice nor is it a recommendation to buy or sell any particular security. Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Pembroke seeks to ensure that the content of this document is correct and up to date but does not guarantee that the content is accurate and complete and does not assume any responsibility for this. Pembroke is not responsible for decisions or actions taken or made on the basis of information contained in this document.