Corporate competition in climate scenario analysis: Current challenges and solutions

The Task Force on Climate-related Financial Disclosures (TCFD) and IFRS (International Financial Reporting Standards) S2 Climate-related Disclosures alignments have recently emerged as a main driving force for companies to disclose climate-related risks. In this context, climate scenario analysis has a direct impact on future quantitative climate risks, and therefore plays a pivotal role in the technical aspects of climate-related risk disclosures. To effectively comply with world trend in climate risk disclosures, competent authorities in Taiwan now encourage major companies to actively align with the TCFD and IFRS S2. However, many firms fell into the myth of the “climate scenario analysis competition”, leading major companies to compete to display various scenario analysis results in their reports. While learning from each other, they tend to lose sight of their own needs, avoiding crucial issues and omitting the truly important information. This study uses the industry chain of climate services as an analytical framework to conduct stakeholder interviews to explore the difficulties companies face in accurately disclosing their climate risks and in conducting scenario analysis, and also examine the role played by public climate service providers. The research results show that standard operating procedures (SOP) for scenario analysis in different industries, customized climate scenario production and analysis, and the cultivation of public and private climate service providers are all indispensable for overcoming challenges currently facing effective corporate climate scenario analysis.