Accounting for climate resilience glossary
The Financial Times journalist Gillian Tett suggests, ‘If you want to hide something in the twenty-first-century world, you don't need to create a James Bond-style plot. Just cover it in acronyms’81 The world of accounting for climate resilience is no different, with numerous acronyms and confusing terms. Here are some common terms and their definitions.
The TCFD defines adaptation as ‘The process of adjustment to actual or expected climate and its effects, to moderate harm or exploit opportunities.’82
The period during which human activities have impacted the environment enough to constitute a distinct geological change.
Refers to the increasing changes in the measures of climate over a long period — including precipitation, temperature and wind patterns.
Climate transition plan
A time-bound action plan that clearly outlines how an organisation will pivot its existing assets, operations and entire business model towards a trajectory that aligns with the latest and most ambitious climate-science recommendations, i.e., halving greenhouse gas (GHG) emissions by 2030 and reaching net-zero by 2050 at the latest, thereby limiting global warming to 1.5°C.
Dynamic Risk Assessment (DRA)
A KPMG proprietary methodology to identify, connect, and visualize an organisation’s risk network in the following four dimensions: likelihood, impact, velocity and connectivity.83
Greenhouse gases (GHG)
The seven GHGs the United Nations Framework on Climate Change (UNFCCC) identified as increasing global warming are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3).
In defining materiality, the Integrated Reporting <IR> framework writes, ‘A matter is material if it could substantively affect the organization’s ability to create value in the short, medium or long term’.84
Actions intended to reduce the impacts of climate change that actually create more risk and vulnerability.85
A World Economic Forum (WEF) term meaning ‘A cluster of related global risks with compounding effects, such that the overall impact exceeds the sum of each part’.86
TCFD defines resilience as
The capacity of social, economic and environmental systems to cope with a hazardous event or trend or disturbance, responding or reorganizing in ways that maintain their essential function, identity and structure while also maintaining the capacity for adaptation, learning and transformation.87
The TCFD defines a scenario as
… a path of development leading to a particular outcome. It is not intended to represent a full description of the future, but rather to highlight central elements of a possible future and to draw attention to the key factors that will drive future developments. Scenarios are hypothetical constructs, not forecasts, predictions or sensitivity analyses.88
The draft ESRS E1, Climate Change, (April 2022) defers to the IPCC 2018 definition of scenario:
A plausible description of how the future may develop based on a coherent and internally consistent set of assumptions about key driving forces (e.g., rate of technological change, prices) and relationships. Note that scenarios are neither predictions nor forecasts but are used to provide a view of the implications of developments and actions.89