Climate change risks and opportunities

The Task Force on Climate-related Financial Disclosures (TCFD) was launched by Mark Carney, Chair of the Financial Stability Board (FSB) and Governor of the Bank of England, with the support of the G20. Its recommendations were published in 2017 and provide a framework for companies to voluntarily disclose the impacts of climate change on their financial performance in a more consistent and comparable way. The intention is to assist investors, lenders and insurers to appropriately assess and price climate-related risks to their portfolios. 

As a professional services firm, PwC is not in one of the priority sectors specified by the TCFD, but we do provide services to clients in each of them.  As one of the members of the Task Force, we played an active role in the development of the TCFD framework and recommendations, and our Managing Partner and Chief Operating Officer, Warwick Hunt, is a signatory to the TCFD Statement of Support.  

We want to play our part in contributing to the targets agreed in the Paris Agreement of 2015, and have reduced the Scope 1 and 2 emissions in our own business by 90% since 2007.  In addition, as a professional services provider, we’re well placed to help bring to market new perspectives and approaches that can help to shape the way that organisations address the challenges associated with climate change.

Governance

Risks to our business relating to climate change, whether strategic or operational, are managed in the same way as other business risks, and in proportion to them, as part of our overall risk management systems.

Our Executive Board has oversight of our Purpose, which is to build trust in society and solve important problems.  One element of this relates to our support for the transition to a low carbon economy. All climate-related metrics that the firm publishes in the Annual Report are independently assured each year, and reviewed by both the Executive Board and the Audit Committee of the Supervisory Board. Our Head of Purpose, Emma Cox, reports to our Chairman & Senior Partner, Kevin Ellis and to our Managing Partner and Chief Operating Officer, Warwick Hunt, and updates the Executive Board twice a year. 

The Executive Board is responsible for establishing systems of internal control and for reviewing and evaluating their effectiveness.  These systems are overseen by our Executive Risk Committee, an Executive Board subcommittee which oversees our business risks and approach to risk management.  Our risk and quality teams work across our business on our professional services risk management systems. 

Strategy

As a professional services firm, PwC delivers tailored, industry-focused services and solutions for public and private sector clients, across our core lines of service - Audit, Risk Assurance, Consulting, Deals and Tax.  One of the strengths of our business is that we are diversified across a wide range of clients, sectors and geographies. Our approach to climate risk in relation to the running of our business and to the services we provide to clients is set out below.

PwC operations

As a people-based organisation we rely on relatively small quantities of energy to run our offices, and we don’t produce significant volumes of greenhouse gases.  Our highest impact is from our business travel. Our offices are not concentrated in one location, and we invest heavily in business continuity to manage the risk of our core operations and business travel being disrupted by physical risks such as extreme weather events induced by climate change. Our business continuity management system is certified to the ISO 22301:2012 standard.  Moreover, we continue to improve our resilience to such potential risks and to minimise our overall carbon footprint through increasing our use of technology and enabling remote working.

Given these mitigating actions, the physical risks to our business strategy from climate change are not currently considered to be material.  On this basis, we have not modelled the potential impacts of different climate-related temperature scenarios.  

Client services

We’re aware of the growing focus from investors and other stakeholders on the impact climate change can have on business and its consequent impact on financial reporting. In our response to the Brydon review into the quality and effectiveness of audit we suggested the use of an ‘assurance map’1 for audit committees. This would help companies to determine the level and type of assurance needed by its stakeholders over the principal risks it faced, which could include climate-related risks.  

Climate risk also has potential implications for other aspects of our work across all sectors, and we can play a valuable role in advising clients on the relevant implications relating to strategy, transactions, risk and reporting. For this reason, we continue to closely monitor regulatory discussions and market developments, and to engage in relevant forums and working groups. As a key input to the 2019 TCFD Status Report, our specialist Sustainability & Climate Change (S&CC) practice analysed the uptake of the TCFD recommendations among more than 1,100 businesses.  We co-authored a report on climate governance with the World Economic Forum (WEF) this year, to equip board directors with the principles and tools to provide appropriate oversight. We continue to publish the Low Carbon Economy Index, tracking the progress of G20 countries in decarbonising their economies. Additionally, we’ve advised a regulator on the development of climate scenarios for its market stress testing, and have been working with the World Business Council for Sustainable Development (WBCSD) on convening industry forums to accelerate TCFD reporting. We’re also working with a range of clients to help them implement the TCFD recommendations, and have run a series of briefings and workshops on the importance of climate risk for our teams working on risk and regulation in financial services.

1. The Future of Audit - A new approach: Creating an Assurance Map

Risk Management

The Executive Risk Committee (ERC) oversees the risk management strategy for our business on behalf of the Executive Board. There are systems of risk control at every level of the firm.  These include our lines of service, which report on risks relating to their business areas. Our risk and quality functions oversee our professional services risk management systems. Additionally, we have firm-wide processes for reviewing new business, and a corporate affairs team which leads the firm’s efforts to track changes in applicable regulatory regimes.  We publish our principal business risks in our Annual Report each year, based on their potential impact (financial or reputational) and chance of occurrence. 

This year the Executive Risk Committee considered the implications of climate-related financial risk to the firm and concluded that it is not a principal risk, and that physical risks relating to climate change remain low. Additionally, we will continue to explore the implications of climate risk for our wider services in the context of regulatory and market developments, and to raise awareness levels among partners and staff.

Metrics & targets

Given the relatively low risk to our business, we don’t currently use financial measures to assess climate-related risks.  However, internally we track the performance of our S&CC business practice, including the investments we make in our provision of technical support to external bodies, and in the development of new perspectives, methodologies and services related to climate change.  Additionally, we track the operational savings from the investments we’ve made to reduce our reliance on fossil fuels and to operate our offices more efficiently. 

In the financial year to 30 June 2019, our greenhouse gas emissions totalled 74,755 tonnes CO2e. 

This breaks down as:

Scope 1: 826 tonnes CO2e
Scope 2: 2,218 tonnes CO2e (market based)
Scope 3: 71,711 tonnes CO2e

Having reduced the total carbon emissions (Scope 1, 2 & 3) from our operations by 29% between 2007 and 2017, we set new five-year reduction targets in 2018 to go further.  These are:

  • To reduce our total operational carbon emissions (tonnes CO2e) by 40% from our 2007 baseline
  • To reduce our business travel carbon emissions by 33% per FTE from our 2007 baseline
  • To maintain our energy reduction at 50% from our 2007 baseline
  • To eliminate our Scope 2 emissions by purchasing 100% of electricity from verified renewable sources
  • To offset 100% of our total Scope 1, 2 and 3 carbon emissions (tonnes CO2e) as reported each year, to remain carbon neutral.

We report our progress against these targets in our Non-financial scorecard, which is externally assured to the ISAE 3000 and ISAE 3410 standards, and also publish information about our programmes to manage our performance on our website.

Contact us

Emma Cox

UK Leader Sustainability & Climate Change, PwC United Kingdom

Tel: +44 (0)7973 317011

Follow us