越南的气候风险和TCFD披露的最佳实践（英）--UnepfiVIP专享VIP免费

下载本文档

阅读 319
格式 pdf
大小 2.27 MB
约90页
2023-04-30
收藏
点赞(0)
海报
举报

Vietnam’s Climate Risks and Best

Practices for TCFD Disclosure

Tangible climate-related financial risk disclosure guidance for emerging and developing market

participants

Imprint

Published by the

Deutsche Gesellschaft für

Internationale Zusammenarbeit (GIZ) GmbH

Registered offices

Bonn and Eschborn, Germany

‘Macroeconomic Reforms/Green Growth Programme‘

16 Tong Dan Street

Hoan Kiem District, Ha Noi

Phone +84 (0)24 3 9364252

Fax +84 (0)24 3 9364262

office.sbv@giz.de

As at

March 2023

Author

GIZ

United Nations Environment Programme Finance Initiative (UNEP FI)

Climate Disclosure Standards Board (CDSB)

Photograph

Source: https://cand.com.vn/Files/Image/thanhbinh/2020/01/21/aaeab53f-18be-42ab-9c3f-c195903b5d13.jpg

On behalf of the

German Federal Ministry for Economic Cooperation and Development (BMZ)

This report reflects work conducted over 12 months in 2021, 2022 and 2023 with a number of leading banks in Vietnam. The authors are grateful

for the participation of the institutions listed below.

◾

State Bank of Vietnam

◾

Vietnam Bank for Social Policies (VBSP)

◾

Agribank (Vietnam Bank for Agriculture and Rural Development)

◾

VP Bank (Vietnam Prosperity Joint Stock Commercial Bank)

◾

The Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV)

◾

HD Bank (Ho Chi Minh City Development Bank)

Contents

List of figures and tables ........................................................................................................................................................................... 4

Foreword ...................................................................................................................................................................................................... 5

Introduction................................................................................................................................................................................... 6

1.1

About this Guidance report ........................................................................................................................................ 6

1.2

Task Force on Climate-related Financial Disclosures (TCFD) ........................................................................ 7

1.3

Recent developments in disclosure....................................................................................................................... 10

1.4

Disclosure in emerging and developing markets ............................................................................................ 11

1.5

Disclosure context in Vietnam................................................................................................................................ 13

Climate-related risks in Vietnam ........................................................................................................................................ 14

2.1

Physical Risks ............................................................................................................................................................... 15

2.2

Transition Risks ............................................................................................................................................................ 20

Principles for disclosure ......................................................................................................................................................... 22

Practical steps towards disclosure ..................................................................................................................................... 24

4.1

Getting

started .............................................................................................................................................................. 25

4.2

Governance ................................................................................................................................................................... 28

4.3

Strategy ........................................................................................................................................................................... 31

4.4

Risk management ....................................................................................................................................................... 42

4.5

Metrics and targets ..................................................................................................................................................... 49

4.6

Additional Considerations ....................................................................................................................................... 59

Conclusion and recommended next steps for Vietnamese banks ...................................................................... 62

5.1

Recommendations for the State Bank of Vietnam as a financial regulator ........................................... 63

5.2

Recommendations for Vietnam

’

financial institutions in managing and reporting on climate

risks................................................................................................................................................................................... 66

Additional regulatory and commercial bank case studies from the programme ........................................... 70

6.1

Regulatory case studies ............................................................................................................................................. 70

UK case study

...............................................................................................................................................................

EU case study................................................................................................................................................................ 72

Japan case study .......................................................................................................................................................... 74

6.2

Commercial bank case studies ............................................................................................................................... 75

Standard Chartered (SC) case study...................................................................................................................... 78

National Australia Bank (NAB) case study ........................................................................................................ 82

List of annual reports referenced in this report .......................................................................................................................... 84

Reference

..................................................................................................................................................................................................

/90

下载本文档

文本预览下载提示常见问题

Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureTangibleclimate-relatedfinancialriskdisclosureguidanceforemerginganddevelopingmarketparticipantsImprintPublishedbytheDeutscheGesellschaftfürInternationaleZusammenarbeit(GIZ)GmbHRegisteredofficesBonnandEschborn,Germany‘MacroeconomicReforms/GreenGrowthProgramme‘16TongDanStreetHoanKiemDistrict,HaNoiPhone+84(0)2439364252Fax+84(0)2439364262office.sbv@giz.deAsatMarch2023AuthorGIZUnitedNationsEnvironmentProgrammeFinanceInitiative(UNEPFI)ClimateDisclosureStandardsBoard(CDSB)PhotographSource:https://cand.com.vn/Files/Image/thanhbinh/2020/01/21/aaeab53f-18be-42ab-9c3f-c195903b5d13.jpgOnbehalfoftheGermanFederalMinistryforEconomicCooperationandDevelopment(BMZ)Thisreportreflectsworkconductedover12monthsin2021,2022and2023withanumberofleadingbanksinVietnam.Theauthorsaregratefulfortheparticipationoftheinstitutionslistedbelow.◾StateBankofVietnam◾VietnamBankforSocialPolicies(VBSP)◾Agribank(VietnamBankforAgricultureandRuralDevelopment)◾VPBank(VietnamProsperityJointStockCommercialBank)◾TheJointStockCommercialBankforInvestmentandDevelopmentofVietnam(BIDV)◾HDBank(HoChiMinhCityDevelopmentBank)ContentsListoffiguresandtables...........................................................................................................................................................................4Foreword......................................................................................................................................................................................................51.Introduction...................................................................................................................................................................................61.1AboutthisGuidancereport........................................................................................................................................61.2TaskForceonClimate-relatedFinancialDisclosures(TCFD)........................................................................71.3Recentdevelopmentsindisclosure.......................................................................................................................101.4Disclosureinemerginganddevelopingmarkets............................................................................................111.5DisclosurecontextinVietnam................................................................................................................................132.Climate-relatedrisksinVietnam........................................................................................................................................142.1PhysicalRisks...............................................................................................................................................................152.2TransitionRisks............................................................................................................................................................203.Principlesfordisclosure.........................................................................................................................................................224.Practicalstepstowardsdisclosure.....................................................................................................................................244.1Gettingstarted..............................................................................................................................................................254.2Governance...................................................................................................................................................................284.3Strategy...........................................................................................................................................................................314.4Riskmanagement.......................................................................................................................................................424.5Metricsandtargets.....................................................................................................................................................494.6AdditionalConsiderations.......................................................................................................................................595.ConclusionandrecommendednextstepsforVietnamesebanks......................................................................625.1RecommendationsfortheStateBankofVietnamasafinancialregulator...........................................635.2RecommendationsforVietnam’sfinancialinstitutionsinmanagingandreportingonclimaterisks...................................................................................................................................................................................666.Additionalregulatoryandcommercialbankcasestudiesfromtheprogramme...........................................706.1Regulatorycasestudies.............................................................................................................................................70UKcasestudy...............................................................................................................................................................71EUcasestudy................................................................................................................................................................72Japancasestudy..........................................................................................................................................................746.2Commercialbankcasestudies...............................................................................................................................75StandardChartered(SC)casestudy......................................................................................................................78NationalAustraliaBank(NAB)casestudy........................................................................................................82Listofannualreportsreferencedinthisreport..........................................................................................................................84Reference..................................................................................................................................................................................................85ListoffiguresandtablesFigure1:TCFDrecommendationsandrecommendeddisclosures............................................................................8Figure2:OverviewofTCFDdisclosurebyindustryandspecificresultsforbankingacrosselevenTCFDrecommendations.............................................................................................................9Figure3:StatusofmandatoryTCFDreportingaroundtheworld..............................................................................10Figure4:Averageannualtemperature(˚C)underdifferentemissionsscenarios......................................................15Figure5:Populationdensityincoastalareas.......................................................................................................................16Figure6:Numberofextremelyhotdays(above35°C)underdifferentemissionsscenarios..............................17Figure7:Climatechangeandsectoralimpacts...................................................................................................................18Figure8:Effectsofheatshocksonagriculturalincome..................................................................................................19Figure9:Vietnam’sforecastedenergyuse.............................................................................................................................20Figure10:TCFDprinciplesfordisclosure................................................................................................................................22Figure11:Practicalstepstowardsimplementation............................................................................................................26Figure12:Exampleofgovernancestructure.........................................................................................................................29Figure13:Exampleofclimate-relatedrisks..............................................................................................................................35Figure14:Exampleofphysicalscenarioanalysis.................................................................................................................37Figure15:Exampleofriskmanagementprocesses............................................................................................................46Figure16:Exampleofclimate-relatedrisksasdriversoffinancialrisks........................................................................48Figure17:Exampleofclimate-relatedfinancialmetrics......................................................................................................51Figure18:Keyprocessesfordatamanagementandcommondatachallengesforcompanies........................52Figure19:ExampleofGHGemissionsdata..........................................................................................................................54Figure20:Exampleofclimate-relatedtargets.........................................................................................................................56Figure22:Barclaysoverviewof2020progressandenhancements.............................................................................76Figure23:Barclaysclimateriskgovernancestructure.......................................................................................................76Figure24:Barclaysclimatedashboard......................................................................................................................................77Figure25:SCGovernanceprogressandfuturepriorities.................................................................................................78Figure26:SCStrategyprogressandfuturepriorities.........................................................................................................79Figure27:SCRiskManagementprogressandfuturepriorities...................................................................................80Figure28:SCMetricsandTargetsprogressandfuturepriorities..................................................................................81Figure29:NABKeyGHGemissionsandenergyuse2021..............................................................................................83Table1:Summarytableofkeyquestions............................................................................................................................24Table2:Climate-relatedrisksandkeyconsiderations......................................................................................................33Table3:Physicalriskdataresources.....................................................................................................................................38Table4:Transitionriskdataresources..................................................................................................................................39Table5:Selectedlistofphysicalrisktools............................................................................................................................40Table6:Selectedlistoftransitionrisktools.........................................................................................................................41Table7:Specialcharacteristicsofclimatechange.............................................................................................................43Table8:Climatechangeimpactsonexistingriskcategories:......................................................................................47Table9:TCFDrecommendedmetrics,includingbankingsectorspecificmetrics..............................................50Table10:Typesofclimate-relatedtargets...............................................................................................................................55Table11:Climate-relatedfinancialdata...................................................................................................................................574Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsForeword5ForewordTheGermanFederalMinistryforEconomicCooperationandDevelopment(BMZ)hascommissionedtheDeutscheGesellschaftfürInternationaleZusammenarbeit(GIZ)GmbHtosupportsitsobjectivesinthefieldofinternationalcooperationforsustainabledevelopment.GIZhasprovidedadvisoryservicestotheGovernmentofVietnamformorethan30years,andiscurrentlyengagedinforgingaheadwiththeJustTransition,includingrealigningeconomicpoliciestoachieveasustainabletransformationofthefinancialsector.Theworldistransitioningawayfromcoal–theworld’smostdominantandmostcarbon-intensivesourceofenergy–andheadingtowardsalowcarbonandcleanenergyfuture.AccordingtotheClimateActionTracker,asofNovember2022,around140countrieshadannouncedorareconsideringnetzerotargets,coveringcloseto90%ofglobalemissions.Vietnamlikewiseannouncedatargettoachievenetzeroby2050duringtheCOP26WorldLeaders’Summitin2021.ItsplanningtoreachthetargetincludesthedevelopmentoftheVietnamGreenGrowthStrategy(VGGS)fortheperiodof2021-2030withavisiontowards2050andtheNationalClimateChangeStrategy,whichwereapprovedbythePrimeMinisteron1stOctober2021and26thJuly2022,respectively.Finance,especiallythebankingsystem,isamongthecorefactorsdecidingthesuccessofthistransition,asitmobilizesandchannelscapitaltoimplementtheroadmapforgreengrowth,climateadaptationandnetzeroemissions.WithintheframeworkofGIZ’sASEANGreenRecoveryregionalprojectand“MacroeconomicReforms/GreenGrowthProgramme”,GIZhasworkedwiththeStateBankofVietnam(thecountry’scentralbank)tomainstreamclimateactionamongcreditinstitutionsinVietnam.TheStateBankofVietnamandGIZ,incollaborationwiththeUnitedNationsEnvironmentProgrammeFinanceInitiative(UNEPFI)andtheClimateDisclosureStandardsBoard(CDSB),hasprovidedtrainingandconsultationtoselectedcommercialbanks,andeventuallydevelopedthe“Vietnam’sClimateRisksandBestPracticesforTCFDDisclosure”Report,whichservesasaGuideforthebenefitoftheparticipantsandothersinemergingmarketssuchasVietnam,whoaregrapplingwiththechallengesofclimate-relatedriskassessmentanddisclosure.Itaimstoenhanceknowledge,improvemethodologiesforassessmentofclimaterisks,andpresentsgoodpracticesaroundfinancialdisclosuregiventheTaskForceonClimate-relatedFinancialDisclosures(TCFD)standards.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsIntroduction61.Introduction1.1AboutthisGuidancereportInthefaceoftheglobaleconomicdislocationcausedbyCOVID-19,thegreenrecoverypreventsunintendedlock-ins,strengthensresilienceandsupportscountriestopursuegoalsofrecoveryandsustainabledevelopmentsimultaneously.Financialinstitutionshaveamajorroletoplayinsupportingagreenrecoveryandpromotingsustainablegrowth.Withclimatechangeposinganexistentialthreatanddemandingthetransformationoftheglobaleconomy,aneffectivegreenrecoveryneedstoactivelyaddressclimatechange.Forcountriesandbusinessestothriveinthischangingworld,theymusthaveastrongunderstandingoftheuniqueclimaterisksandopportunitiestheywillface.Inthisprogramme,GIZandUNEPFIcollaboratedtobuildthecapacityofVietnamesebankstoidentify,assess,anddiscloseclimaterisksandopportunities.Thisprogramexploredthephysicalandtransitionimpactsofclimatechangetoempowerparticipantstomanageclimaterisksandsupportmitigation,adaptation,andresilienceprojects.ThroughaseriesofinteractivewebinarsandworkshopswithUNEPFIaswellasotherclimateexperts,participantswereintroducedtogoodpracticesondisclosureandassess-ment.ParticipantsalsoengageddirectlywithclimateriskandopportunityassessmenttoolsandexploredtheresearchonclimateimpactsbothgloballyandwithinVietnam.TheprogrammehadfourmainaimsinenhancingthecapacitybuildingofVietnamesebanks.Theseincluded:1.ProvidinganunderstandingofVietnam-specificphysicalandtransitionrisks.2.Recognisingtheroleofthefinancialsectorinsupportingthegreenrecoveryandlow-carbontransition.3.ExploringgoodpracticesregardingclimatedisclosuresandmanagementthatcontributetoacomprehensiveTCFDreport.4.Developinganappreciationfortherangeofemergingregionalandglobalclimateregulationsandthestepsrequiredtomeetthesenewreportingrequirements.Followingtheprogram,participatinginstitutionswillbeginintegratingclimateriskintotheirriskmanagementpractices,consideringclimateintheirbusinessdecisions,andreportingontheirclimate-relatedfinancialrisksandopportunities.Thispaperintendstoserveasahands-onresourcetoprogramparticipantsandothersinVietnam.Itfeaturesanoverviewontheclimate-relatedfinancialrisksandopportuni-tiesinVietnamandtheirimpactsondifferenteconomicsectors.InconjunctionwiththeClimateDisclosureStandardsBoard(CDSB)—agloballeaderonTCFD-andclimate-re-Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsIntroduction7lateddisclosures—thereportalsoexplorescurrentgoodpracticesforeachoftheelevenTCFDrecommendeddisclosures.Thefollowingsectionsseektobeanaccessibleuserguidetoinstitutionslookingtotakethefirststepsonclimateriskmanagement,assess-ment,anddisclosureaswellasthoselookingtoenhancetheirclimatepractices.Indoingso,thispaperservesfourobjectives:1.Summarizingthemaincontentdeliveredduringthetrainingprogramandpreserv-ingitforfuturepractitioners2.OfferingguidanceastothenextstepsforVietnamesebankstodeveloptheirTCFDreports3.ProvidingreferencematerialfortheStateBankofVietnam(SBV)todevelopguid-anceofclimateriskdisclosures4.EnablingthescalingupofclimateriskknowledgeintheVietnamesefinancialsystemandthepromotionandspreadingofgoodclimateriskpractice1.2TaskForceonClimate-relatedFinancialDisclosures(TCFD)TheG20FinancialStabilityBoardestablishedtheTCFDin2015toidentifytheinfor-mationneededbythemarkettoappropriatelypriceclimateriskandallocatecapitaltopreventfinancialinstability.In2017,theTCFDreleasedtheirfinalreportwhichincludedasetofvoluntarydisclosurerecommendations(Figure1)thataredesignedtoelicitconsistentandcomparabledisclosureofclimate-relatedinformationinthemainstreamfinancialreporttoinformdecision-makingandcapitalallocationbyinvestors,lenders,andinsuranceunderwriters.Theserecommendationsarestructuredaroundfourcoreelements—governance,strategy,riskmanagement,metricsandtargets—withelevenrecommendeddisclosuresandadditionalimplementationguidancetosupportreportingorganisations,includingindustry-specificguidanceforbanks.InOctober2021,theTCFDupdatedtheirimplementationguidanceforthefirsttimesincetherecommendationswerelaunchedin2017.Respondingtomarketdemand,thisadditionalguidanceprovidesfurtherclarificationonfinancialmetricsandtargets,butalsointroducestheconceptoftransitionplanswherebyorganisationsarerequiredtodescribetheplansfortransitioningtoalow-carboneconomy,includingGHGemissionsreductiontargets(TCFD,2021c).Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsIntroduction8GovernanceStrategyRiskManagementMetricsandTargetsDisclosetheorgani-sation’sgovernancearoundclimate-relatedrisksandopportuni-ties.Disclosetheactualandpotentialimpactsofclimate-relatedrisksandopportunitiesontheorganisation’sbusinesses,strategy,andfinancialplanningwheresuchinforma-tionismaterial.Disclosehowtheorganisationidenti-fies,assesses,andmanagesclimate-re-latedrisks.Disclosethemetricsandtargetsusedtoassessandmanagerelevantclimate-re-latedrisksandoppor-tunitieswheresuchinformationismaterial.a)Describetheboard’soversightofclimate-re-latedrisksandoppor-tunities.a)Describetheclimate-relatedrisksandopportunitiestheorganisationhasidentifiedovertheshort,medium,andlongterm.a)Describetheorgan-isation’sprocessesforidentifyingandassess-ingclimate-relatedrisks.a)Disclosethemetricsusedbytheorgan-isationtoassessclimate-relatedrisksandopportunitiesinlinewithitsstrategyandriskmanagementprocess.b)Describemanage-ment’sroleinassessingandmanagingrisksandopportunities.b)Describetheimpactofclimate-relatedrisksandopportunitiesontheorganisation’sbusi-nesses,strategy,andfinancialplanning.b)Describetheorgan-isation’sprocessesformanagingclimate-re-latedrisks.b)DiscloseScope1,Scope2,and,ifappropriate,Scope3greenhousegas(GHG)emissions,andtherelatedrisks.c)Describetheresil-ienceoftheorganisa-tion’sstrategy,takingintoconsiderationdifferentclimate-re-latedscenarios,includ-inga2°Corlowerscenario.c)Describehowprocessesforiden-tifying,assessing,andmanagingclimate-relatedrisksareintegratedintotheorganisation’soverallriskmanagement.c)Describethetargetsusedbytheorgan-isationtomanageclimate-relatedrisksandopportunitiesandperformanceagainsttargets.Figure1:TCFDrecommendationsandrecommendeddisclosures.Source:TCFDFinalReportSincethereleaseoftherecommendations,theTCFDhaveamassedover2,700globalsupportersacrossthemarket(asofDecember2021),whichincludescorporates,inves-tors,andgovernments(TCFD,2021a).InJuly2021,theFinanceMinistersandCentralBankGovernorsoftheG20releasedacommuniquewhichendorsedtheTCFD,statingthatthey“willworktopromoteimplementationofdisclosurerequirementsorguidance,buildingontheFSB’sTaskForceonClimate-relatedFinancialDisclosures(TCFD)frame-work,inlinewithdomesticregulatoryframeworks,topavethewayforfutureglobalcoor-dinationefforts,takingintoaccountjurisdictions’circumstances,aimedatdevelopingabaselineglobalreportingstandard.”(G20,2021).Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsIntroduction9TheTCFDreleasedthefifthstatusreportinOctober2022,whichexaminedthecurrentstateofreportingaroundtheworld.Theoverallfindingsofthereviewconcludedthatalthoughdisclosurehasincreasedyear-on-year,progressisstillneededtoachievefulldisclosure.Only4%ofcompaniesdisclosedinlinewithall11recommendeddisclosuresandonlyaround40%disclosedinlinewithatleastfive(TCFD,2022).Figure2:OverviewofTCFDdisclosurebyindustryandspecificresultsforbankingacrosselevenTCFDrecommendations.Source:TCFDStatusReport(2022).AsofOctober2022,thereare1,539FinancialSectorInstitutionsthathavebecomeoffi-cialsupportersoftheTCFD(TCFD,2021a).AlthoughtherehasbeensomeimprovementinthenumberofbanksdisclosingTCFDalignedinformation,thebankingindustryisgenerallybehindthetrendacrossalltheTCFDrecommendationscomparedtootherindustries(Figure2),especiallywithnoticeablegapsinthereportingofclimate-relatedmetricsandtargets.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsIntroduction101.3RecentdevelopmentsindisclosureThecurrentprogressinTCFD-alignedreportinghasoccurredprimarilythroughvoluntarydisclosureoftherecommendations.However,governmentsandregulatorsareheadingtowardsmandatoryclimate-relatedreportingrequirements(seeFigure3).InSeptember2020,NewZealandwerethefirsttoannounceplanstomandateclimate-relatedfinancialdisclosures,thelawiscurrentlyunderconsiderationasofFebruary2023.TheUKhasalsoreleasedproposedlegislationthat,subjecttoparlia-mentaryapproval,willrequireover1,300largecompaniesandfinancialinstitutionstodisclosein-linewiththeTCFDby2025.Figure3:StatusofmandatoryTCFDreportingaroundtheworld.Source:CDP(2021)ThroughtheNetworkforGreeningtheFinancialSystem(NGFS),centralbanksandsupervisorshavestartedtoconsidertheirroleinsupportingeffortstowardsgreeningthefinancialsystem.Whilstaddressingtheirprudentialsupervisionandsettingmone-tarypolicyframeworks,centralbanksarealsobeginningtocompletetheirownclimatestresstests.Forexample,climatestresstestshavebeencompletedbytheBankofEngland,BanquedeFrance,andinthefuturetheEuropeanCentralBank.TheNGFShavealsopublishedextensiveguidanceonscenarioanalysisandhavedesignedasuiteofreferencescenariosforfinancialinstitutionslookingatbothphysicalandtransitionrisks.ThePeople’sBankofChinahasalsosignalleditaimstomakeclimate-relatedriskdisclosuremandatory,startingwithasampleoffinancialinstitutionsandexpandingtothewidermarketinthefuture.Additionally,theBancoCentraldoBrasil(BCB)releasedforconsulta-tionregulationsonthedisclosureofESGinformation,includingclimate-relatedrisks,byfinancialinstitutionsthatwereinspiredbytheTCFDrecommendations(BCB,2021).StockExchangesarealsoconsideringhowtoenforceandsupportthedisclosureofTCFDVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsIntroduction11recommendations.TheUNSustainableStockExchangeInitiativereleasedtheirModelGuidanceonClimateDisclosureinJune2021,whichincludesatemplateforexchangestoguideissuersonhowtoimplementtheTCFDrecommendations.Addi-tionally,inAugust2021theSingaporeExchangeRegulationproposedaroadmapformandatoryTCFD-aligneddisclosurestartingin2022withanexpectationthatdisclosurewillbecomemandatoryformostindustriesby2024.Whilstclimate-relateddisclosureisincreasinglybecomingmandatory,therehasalsobeensignificantchangesinthedevelopmentofinternationalreportingstandards.InSeptember2020,theTrusteesoftheIFRSFoundationpublishedaconsultationpapertoassessthedemandfor,anditsrolein,thedevelopmentofinternationalsustainabil-itystandards.Followingextensivepreparation,inNovember2021theIFRSFoundationannouncedtheformationoftheInternationalSustainabilityStandardsBoard(ISSB)toaddressanddevelop—inthepublicinterest—acomprehensiveglobalbaselineofhigh-qualitysustainabilitydisclosurestandardstomeetinvestors’informationneeds(IFRS,2021a).TogivetheISSBaheadstart,aTechnicalReadinessWorkingGroup(TRWG)wasestablishedinMarch2021.TheTRWGalsopublishedaprototypeforclimate-relateddisclosures,coincidingwiththeannouncementoftheISSB'screation.InMarch2022theISSBhaspublishedanexposuredraftforasustainability-relateddisclosurestandardthatoutlinesgeneralrequirements,alongsidetheproposedclimate-relateddisclosuresstandard.ThedraftsareexpectedtobefinalizedinJune2023.ThisannouncementalsoconfirmedtheconsolidationoftheValueReportingFounda-tion(whichhousesIntegratedReportingFrameworkandtheSASBStandards),andtheClimateDisclosureStandardsBoard(CDSB).TogetherwiththeInternationalAccountingStandardsBoard(IASB),theTCFD,andtheWorldEconomicForum(WEF),theseorgan-isationscreatedtwoprototypestandardswhichwillinformthedevelopmentoffuturereportingstandards(IFRS2021b).IncontextoftheTCFD,thestructureoftheprototypeclimatestandardfollowsandbuildsuponthestructureandrequirementsoftheTCFDrecommendations.1.4DisclosureinemerginganddevelopingmarketsForthebankingindustry,climate-relatedrisksarecomplexandoftennewontheriskregister.Notonlydobanksneedtomitigaterisksbyestimatingunexpectedlosses,buttheymustalsoreviewtheirriskexposuresandassesstheiropportunitiesintransitioningtogreenerinvestments.However,thecontextsandjurisdictionsinwhichbanksoperatewillimpactthetypesofphysicalandtransitionrisksandopportunitiesthattheyareexposedtoaswellasthenatureofrequirementsneededtomanagesuchissues.Itisprojectedthatemergingmarketsgenerallyarealready,andwillcontinuetobe,exposedtothegreatestimpactsofglobalclimatechange.Thismeansthatcompaniesandfinancialinstitutionsinemergingmarketswilllikelybemoreexposedtothephysicalrisksofclimatechange.Whileinternationalfocusondecarbonisationcentresmoreimmediatelyontheworld’shigh-incomeandhigh-emissioneconomies,emergingmarketswillalsoneedtoshifttowardslow-carbonalternativestoalignwithglobalagreementswhilesimultaneouslymaintaininggrowth.Thismeansthatwhilemanyemergingmarketsfacefewerregulatoryandtransitionrisksatpresentthaninhigher-incomecountries,thesewillinevitablygrowoverVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsIntroduction12time.ThisisparticularlytrueformarketslikeVietnamthatarepresentlyhighlydependentonfossilfuels.Corporatereportingisanessentialtoolformarketstomanagetheseclimate-relatedrisksandmakethemostoftheopportunitiesthatdecarbonisationoffersintheshort-,medium-andlong-term.Suchdisclosuresalloweconomicactorstounderstandhowrisksaredevelopingandtheoutlookforvariouscompanies,evaluatethebenefitsofdifferentstrategiesandtargets,andultimatelyrelocatecapitaltoensuresustainablereturns.Theimportanceofqualitydisclosureisespeciallyimportantwhenweconsidertheamountsofcapitalrequiredtofunddecarbonisation.IthasbeenestimatedbytheInternationalEnergyAgency(IEA),forinstance,thatbytheendofthe2020soverUS$1trillionwillneedtobeinvestedincleanenergyinemerginganddevelopingmarketstoputtheworldoncoursefornet-zeroemissionsby2050(IEA,2021).Aswithothermarkets,therewillbechallengesindevelopinghigh-qualitydisclosuresandutilisingthisinformation.Forbanksandotherfinancialinstitutions,thisdeficitisespeciallyimportantgiventheirrelianceonahugevarietyofreporteddataandinformationforunderstandingandactingontheclimate-relatedrisksandopportunitiescontainedwithintheirbooks.Chiefamongsttheissuesofclimate-relatedreportingfacedbybanksandsimilarinstitutionsarethegapsindataavailability.Withoutmandatedreportingrequirements,disclosuresarevoluntaryandasaresultfarsparserandoftenlessconsistentandcomparablethanisrequiredforbankstoproperlyunderstandtheirexposurestoclimate-relatedrisksandopportunities.CompoundingthisissueofreportingqualityisalackofcapacityandtechnicalresourcesdedicatedtoassistingcompaniesinemergingmarketssuchasVietnamtobestunderstandandactontheseissues.Instead,muchofthetechnicalmaterialstoassistclimatereportpreparersandusersaredesignedbyandforthoseinhigh-incomeeconomies.Morebroadly,though,thelackofaclearroadmapandaccompanyingpoliciestowardsdecarbonisationfromtheVietnamesegovernmentresultsinalackofdirectionforthemarket.Weakpolicysignals,suchasVietnamesebusinesslackinganemissionspathwayorgoalaroundwhichtodeveloptheirstrategies,createanimmediateimpedimenttodevelopingdecision-usefulclimatedisclosures.Intermsofdisclosurerequirements,emergingmarketsmaybelessmaturethendevel-opedmarketsregardingclimate-relatedfinancialdisclosure.However,thatisnottosaythatemergingmarketsdonothaveESGdisclosurerequirements.Inparticular,thediffer-entcharacteristicsofreportingrequirementsisnotconducivetothecurrenttrendsinreportingclimate-relatedfinancialinformationinthemainstreamannualreport(WBCSD,2018).However,inadditiontothesereportingrequirementsanddevelopingnormsforclimatedisclosure,asevidencedbytherecentannouncementsfromSingaporeandHongKong’sfinancialauthorities,therealsoexistsabusiness-to-businessimpedimentforanalysingandreportingonclimaterisksandopportunitiesaroundtheworldinde-pendentofnationalregulation.AsmorecompaniesaremandatedtodisclosepubliclyagainsttheTCFD,thisnecessitatesanengagementwithorganisationsthroughoutthevaluechaintofullyappreciatetheirexposuretoclimaterisks.Asakeyareaformanyelementsoftheworld’seconomy,companiesinVietnamwillfurtherbepartofthisexercisetomapandunderstandtheimpactsclimatechangethroughoutthecomplexitiesofthevaluechain.ThisreportingmayalsobeanimportantsourceforbanksinVietnamtounderstandtheirownrisksandopportunitiesrelatingtothephysicalimpactsofclimatechangeandeffortstowardsdecarbonisation.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsIntroduction131.5DisclosurecontextinVietnamCurrentlythereisnospecificrequirementinVietnamforfinancialinstitutionstodiscloseclimate-relatedinformation.However,VietnamdoeshavesomeESGreportingrequire-ments,including:◾CircularNo.96/2020/TT-BTCoftheMinistryofFinancerequireslistedcompaniestodiscloseinformationintheannualreportrelatingtosustainabledevelopment,corpo-rateresponsibility(includingenvironmentalandsocial),andcorporategovernance.◾TheStateSecuritiesCommissionofVietnamhaveproducedguidanceincludingtheSustainabilityReportingHandbookandtheVietnamCorporateGovernanceManual.ThestockexchangesHoChiMinhStockExchangeandHanoiStockExchangearebothmembersoftheUNSustainableStockExchangeInitiativeandareTCFDsupporters(since2017and2019respectively).BothhaveESGreportingrequirementsasalistingruleunderCircular155/2015/TT-BTC,andadditionalguidancetosupportissuersonESGreporting.Currently,thereisnolistingruleorreportingguidancespecificallyonclimate-relateddisclosure.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsClimate-relatedrisksinVietnam142.Climate-relatedrisksinVietnamTheaimofthissectionistoprovideanoverviewofVietnam’sphysicalandtransitionrisks.Inadditiontothesebroadcategoriesofclimaterisks,theirimpactsandimplica-tionsonspecificsectorswillalsobeconsideredinthissection.Byexploringtheserisks,Vietnam’sfinancialinstitutionswillbeabletoidentifyriskswithintheirportfoliosaswellaspotentialopportunitiestosupportclimatemitigationandadaptationwithinVietnam.Withitslongcoastline,highpopulationdensity,andlocationwithinthetropicaltyphoonbelt,Vietnamisparticularlysusceptibletoclimate-relatedhazards.ThepeopleofViet-namareacutelyawareoftheserisks.AccordingtoasurveybyISEASYusofIshakInsti-tute,80%ofVietnamesesurveyedconsideredclimatechange“aseriousandimmediatethreattothewell-beingof[their]country”withnearly98%consideringit“animportantissuethatdeservestobemonitored”(ISEAS,2021).TheISEASsurveyalsoaskedrespondentstonamethethreemostsevereclimaterisksforVietnam.Theiranswersinorderofconcernwerefloods,sealevelrise,anddroughts(ISEAS,2021).TheassessmentsoftheGlobalClimateRiskIndexandtheEU’sINFORMprojectonclimateriskssupporttheprominenceofthesehazardsandaddtropicalcyclonesasanotherhazardofconcern(INFORM,2019).Inthefaceofthesechallenges,Vietnamhasasignificantneedtodevelopsuitableadaptationandresiliencymeasures.Thetransitiontoalow-carboneconomyalsopresentsrisksforVietnam.Asarapidlyindus-trializingnation,Vietnam’semissionsanddependenceoncoalhaverisenrapidlyinrecentyears.Withtheworldaligningaroundthegoalofnetzeroby2050,Vietnammayfacepressuresfromtradepartnersanditsowncitizenstodecarbonize.Presently,Vietnam’sannouncednationallydeterminedcontribution(NDC)undertheParisAgreementfallsshortofwhatisneededtoalignwitha1.5°Cworld,aconsequenceofthetensionbetweenclimatecommitmentsandfossilfueldrivengrowth(ClimateActionTracker,2021).Vietnam’sMinistryofNaturalResourcesandEnvironment(MONRE)hasundertakenanumberofinformativeassessmentsofnationalclimaterisksinconjunctionwithinter-nationalinstitutionssuchastheWorldBank,AsianDevelopmentBank,andAgenceFrançaisedeDéveloppement(AFD)(MONRE,2021).AtCOP26inGlasgow,MONREandAFDreleasedanextensivereportontheclimaterisksfacingthenation,theirimpacts,andadaptationplanning(MONRE&AFD,2021).ThatreportisreferencedinthissectionalongwithanumberofothersthatdemonstrateboththephysicalandtransitionrisksconfrontingVietnam.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsClimate-relatedrisksinVietnam152.1PhysicalRisksDependingontheemissionspathwayfollowed,temperaturesinVietnamcouldriseover3°Cbylateinthe21stcentury(IPCC,2018).GlobalwarmingispoisedtoincreasetheseverityofthenaturalhazardsthatVietnamalreadyfaces.Figure4:Averageannualtemperature(˚C)underdifferentemissionsscenariosDuringthedecadeof2001–2010,typhoons,floods,droughts,andlandslidesclaimed9500livesinVietnamandcausedlossesequivalentto1.5%ofGDP(ClimateLinks,2017).Inawarmingworld,thesehazardsarelikelytogrowmoresevere.Risingsealevelsandstrongerstormscanmakefloodsmoredevastating.Increasedtemperaturesmayalsoproduceconsequencesfromproductivitylossduetoheatwavestotheexpandingrangeoftropicaldiseasevectors.Accordingtothe2021reportofMONREandAFD,increasingclimatevariabilityhasthepotentialtodisproportionatelyharmagriculturalincomes,especiallyduringtimesofhightemperature(MONRE&AFD,2021).Inaddition,thehighertemperatureshavebeenshowntoreduceproductivityandrevenuesforfactoriesandworkers,whichisanon-lin-eareffect(highertemperatureshaveevenmoresignificanteffectsontheworkforce)(MONRE&AFD,2021).Themostprominenthazardsarecoveredinmoredetailalongwithaseparatediscussionoftheireconomicimplications.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsClimate-relatedrisksinVietnam16FloodingFloodingrepresentsthelargestclimate-relatedriskfacingVietnam,todayaccountingforanestimated97%ofaverageannuallossesfromhazards(WorldBank,2021).Atpresent,millionsofpeoplelivewithinfloodzones,withmajorurbanareasofHoChiMinhCityandHaiphongbarelyabovesealevel.AvisualizationofVietnam’spopulationdensityinFigure5demonstrateswhyfloodinghasthepotentialtocausemassivedisruption(ClimateLinks,2017).Figure5:PopulationdensityincoastalareasFloodingisnotconfinedtourbanareasbutcanalsoaffecttheMekongDeltaandRedRiverDelta,Vietnam’sprimaryagriculturalregions(IPCC,2018).Riverinefloodinghasthepotentialtodamagecropsanddrivepopulationdisplacement.Withoutadaptation,9%ofGDPmaybeatriskfroma1-in-100-yearfloodthathitstheRedRiverDelta(Neumannetal.,2015).TheMekongDeltaisthethirdlargestdeltaonEarth,ishometo17millioninhabitants,andprovidesoverhalfofVietnam’sriceproduction(muchofitexported).Disruptionsintheregioncanhavebothdomesticandinternationalconsequencesonfoodavailability(MONRE&AFD,2021).IntheMekongDeltaandacrossthecountry,thereisanurgentneedtodevelopresilientinfrastructureandmanagetherisksofcatastrophicfloodsandclimatechange.SealevelriseUnfortunately,globalwarmingwillbringrisingsealevels,withtheIPCCestimatingthatglobalsealevelmayriseover1meterthiscentury(IPCC,2018).Risingseaswillthreatenthecoastalcitiesandmakecurrentfloodingsignificantlyworse.Inaddition,risingseaVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsClimate-relatedrisksinVietnam17levelscreateotherthreatssuchassaltwaterintrusion,whereseawatercaninfiltratefreshwateraquifers,hurtingagriculturalproductivityandthreateningwatersupplies.TropicalcyclonesWarmerseasurfacetemperaturesincreasetheenergyavailablefortheformationoftropicalstormsandmaymakethosestormsstronger(IPCC,2018).CyclonesarealreadyamajorcauseofflooddamageinVietnam,withthenationexperiencingnearly100stormsfrom1990–2020(WorldBank,2021).Highersealevelscoupledwithstron-gerstormswilldrivestormsurgesfurtherinland.Inaddition,climatemodelssuggestincreasedprecipitationinVietnam,whichislikelytoworsentheseverityofdamagingstormsandtheirresultantfloods(WorldBank,2021).HeatwavesAsatropicalcountry,Vietnamalreadyexperiencestemperatureswellabovetheglobalaverage.Thenumberofextremelyhotdayswillonlyincreasewithglobalwarming.Heatwavesbecomemorefrequentunderhigheremissionsscenarios,butevenwithcurrentwarming,Vietnamislikelytoexperienceanincreaseintheirfrequency.Globally,HanoiandHoChiMinhCityaretwoofthemostat-riskmetropolisesfromexperiencingheatstress(Matthewsetal.,2017).Heatstresscanreduceeconomicoutput,reduceagricul-turalproductivity,increaseenergyexpenditures,andthreatenhumanhealth.Evensmallrisesinaveragetemperatureshavethepotentialtocausehighernumbersofdanger-ouslyhotdays(WorldBank,2021).Figure6:Numberofextremelyhotdays(above35°C)underdifferentemissionsscenariosVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsClimate-relatedrisksinVietnam18WithVietnam’shumidenvironment,theeffectsofhightemperaturesareamplified.DroughtsDespitehighlevelsofprecipitation,incertainpartsofthecountry,climatechangehasthepotentialtocauseincreaseddroughts.Althoughclimatechangewillcauseanincreaseinrainoverall,existingrainfallpatternsmaychange.Athigherlevelsofwarming,certaindroughteventsmayoccurmorefrequentlythantheypresentlydo(IPCC,2018).SectorhazardsTheclimate-inducedphenomenanotedabovehavetheabilitytoimpacteconomicactiv-ityinavarietyofways.SomeofthesepotentialeffectscanbeseeninFigure7,below(ClimateLinks,2017).Figure7:ClimatechangeandsectoralimpactsAgricultureAgriculturecanbeaffectedbyrapidlyevolvingclimaticconditionsthatcanthreatenyields.Formanycrops,yieldswilldeclinewithrisingtemperaturesinVietnam.Heavierrainfallandrunoffcanalsothreatentheproductivityofcropsandheatwavescanendan-gerfarmersworkinginthefields.Weather-relatedshockshavebeenshowntoreduceagriculturalincomes(aneffectthatincreasesinmagnitudeathighertemperatures).Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsClimate-relatedrisksinVietnam19Figure8:EffectsofheatshocksonagriculturalincomeSource:MONRE&AFD,2021AquacultureAquaculturewillbeaffectedbyrisingsealevelsandincreasinglypowerfulstormsthatcanharmcoastalecosystemsandhurttheirproductivity.Warmerwatertempera-turesandoceanacidificationcanalsoreducetheproductivityoftheseecosystemsaskeystonespecies,suchascoral,dieoff.InfrastructureRisingsealevelsthreatencoastalinfrastructurewithinundation.Morepowerfulextremeeventssuchascyclonesandfloodscandamageinfrastructureacrossthecountry.Thecostofmaintainingviableinfrastructurewillincreaseastheclimategrowsmoreextreme.IndustrialsIndustrialassetsaresubjecttodamagesfromextremeeventssuchascyclonesandfloodingthatareexpectedtoworsenwithclimatechange.Climatechangemayalsodisruptsupplychainsorcausechangesintheavailabilityofnaturalresourcesnecessaryforproductionprocesses.EnergyHeatwavesandhigheroveralltemperatureswillincreaseenergydemandandpotentialstressonenergygrids.Inaddition,certainenergysourcessuchashydropowermayVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsClimate-relatedrisksinVietnam20becomelessproductiveunderchangingclimaticconditions.Powerplantsthatuselargequantitiesofwatermayalsofacechallengesdependingontheirlocation.2.2TransitionRisksVietnamisarapidlyindustrialisingeconomy,withsomeoftheworld’shighestgrowthratesoverthepasttwodecades.Thatdevelopmenthasseenmovementsfromthecountrysidetothemajorurbanareas,especiallytothemegacitiesofHoChiMinhCity,Hanoi,andHaiphong.Withgreatereconomicoutputandhigherlivingstandards,Viet-namhasseenarisingdemandforenergyproduction.Energyproductiontripledfrom2010to2020(EIA,2020).Inaddition,globalisationhasseenVietnambecomeasignifi-cantexporterofgoods.Thesedevelopmentsarethehallmarksofanemergingeconomy,butalsoindicatethatenergyneedswillcontinuetogrowrapidlyintheyearsahead.Energyoutputisexpectedtodoublebetween2020and2030undercurrenttrends(EIA,2020).Unfortunately,thatmayresultinasignificantincreaseincoalconsumptionanditsaccompanyingairpollu-tionandclimateeffects.Figure9:Vietnam’sforecastedenergyuseSource:EIA,2020However,thetransitiontoanet-zeroworldisbecomingincreasinglyurgent.Evermorecountriesarecommittingtonet-zerotargetsandtakingmoreassertiveactiononclimatechange.Inthegloballyintegratedeconomy,thispresentschallengestorapidlygrowing,producereconomieslikeVietnam.ThereareanumberoftransitionrisksthatfirmsinVietnamwillfaceduringthetransformationtoalow-carbonworld.PolicyrisksVietnamisexpectedtoraiseitsclimateambitioninthenextfewyears.Oneactionthathasgarneredattentionisthepotentialcreationofadomesticemissionstradingscheme(ETS)by2025.ETSwilllimitemissionsthroughtheassignmentofcreditswhichcanthenbetraded.Forheavyindustryandcoal-poweredenergyproduction,thepurchaseofVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsClimate-relatedrisksinVietnam21thesecreditswillbeanadditionalcosttotheirbusinesses.Anotherpolicyunderconsid-erationisraisedenergyefficiencystandards.Forenergyinefficientbuildingsandassets,capitalexpenditureonretrofitsmayberequiredtomeetthesenewstandards.Thesepolicieswillalsohavemanyenvironmentalandeconomicbenefits,butemitterswillfaceincreasinglychallengingconditions.TechnologyrisksWhilecoalusecontinuestogrow,Vietnam’srelianceoncoaluseandgrowingenergydemandwillputpressureonthedeploymentofnewtechnologiestobothdecarbon-izeandmeetrisingneeds.Thefallingcostofrenewablesmeansthattheyareincreasinglycost-competitivewithfossilfuels,buttheirdeploymentrequiressignificantupfrontinvestment.Furthermore,theearlyretirementoffossilfuelassetsisundoubtablybeneficialfortheclimate,butcanposechallengestomajorproducers,theirshareholders,andtheirlenders.Theimpositionofacarbontaxbothdomesticallyandbyimportingnationswillincreas-inglyfavourtheuseoflow-carbonmethodsofproduction.Incertaincases,thereareopportunitiestoretrofitexistingindustrialassetsforthislow-carbonproduction,butinothercasesnewfacilitiesmayneedtobecreated.Thedevelopmentofthesenewfacilitiesmayhaveimpactsonthepriceofindustrialgoodswhileatthesametimecarbonpricesmaythreatentheprofitabilityofhigh-emittingincumbents.MarketrisksUnderintensifyingclimatechangeoradisorderlytransition,internationalrelationshipscanbetested.Currentexamplesaretensionsbetweenneighbouringstatesoverthestatusofindividualsfleeingclimateimpactsandincreasedprotectionismaslegacyindustriesfacethreatsfromthelow-carbontransition.TheseforcescanparticularlyaffectexporternationslikeVietnam,astherulesofinternationaltradecontinuetoevolve.Inaddition,thecarbonborderadjustmentpoliciesofotherdecarbonisingnationsmayhaveoutsizedimpactsonVietnam.Anotherriskcomesfrompotentialchangesininter-nationalinvestmentflowsasnationsandinstitutionalinvestorsbegintorestrictinterna-tionalfundingoffossilassets.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPrinciplesfordisclosure223.PrinciplesfordisclosureThepurposeofdisclosureistoprovidedecision-usefulinformationtoreportusers,whichisanalreadyestablishedconceptincorporatereporting.Intermsofclimate-re-lateddisclosure,informationisdecision-usefulwhenitisusedbyreportuserstomakedecisionsaboutthereportingorganisation.Inparticular,investorsarelookingfordatathatcaninformtheirinvestmentdecisionsallowingthemtoappropriatelypricerisksandgaugeopportunitiessoastoeffectivelyallocatecapital.Toensureinformationisdecision-useful,reportingorganisationsshouldapplyprinciplesforeffectivedisclosure.Reportingframeworksincludeprinciplesforeffectivedisclosurethataredesignedtoelicithigh-qualityanddecision-usefuldisclosuresthatisusefultoinvestors.Inachang-ingreportinglandscape,withevolvingreportingrequirementsanddeeperunderstandingoftheimpactsofclimatechange,theseprinciplesestablishfoundationalexpectationsthatwillhelptomaintaincoherenceandconsistencyindisclosure.Whenestablish-ingthenecessaryinternalstructuresandprocessestoidentify,assess,manageanddiscloseclimate-relatedrisksandopportunities,theseprinciplesshouldbeappliedtoensurethatthefinalinformationdisclosedisreliableandcomplete.TheTCFD’sprinciplesfordisclosure(Figure10)seektoencouragethereportingofdeci-sion-usefulinformationthatisclear,consistent,comparableandreliable.Together,theseprinciplesaredesignedtohelpreportingorganisationsconnectclimate-relatedissuestotheirfinancialreporting.TCFD’sFundamentalPrinciplesforEffectiveDisclosurePrinciple1:DisclosuresshouldpresentrelevantinformationPrinciple2:DisclosuresshouldbespecificandcompletePrinciple3:Disclosuresshouldbeclear,balanced,andunderstandablePrinciple4:DisclosuresshouldbeconsistentovertimePrinciple5:Disclosuresshouldbecomparableamongorganisationswithinasector,industry,orportfolioPrinciple6:Disclosuresshouldbereliable,verifiable,andobjectivePrinciple7:DisclosuresshouldbeprovidedonatimelybasisFigure10:TCFDprinciplesfordisclosureSource:TCFDFinalReportVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPrinciplesfordisclosure23Transparencyisanessentialelementofcredibledisclosureandinformationthatispublishedshouldbereliableandobjective,whichmeansthatitshouldbeneutralandfreefromerror.Itshouldalsobebalancedbyincludingsuccessandprogress,butalsoanynegativeclimateimpactsorlackofprogresstowardstargets.Disclosurealsoneedstobeconsistentandcomparable.Applyingaconsistentapproachtothecollectionanddisclosureofdataiskeytoachievingyear-on-yearcomparability.Forexample,itwouldbedifficulttounderstandtheorganisation’sprogresstowardstheirtargetsifthemethodologiesappliedtothecalculationofthedataiscontinuouslyupdatedorchanged.Additionally,consistencyisalsoexpectedbetweenmultipleorgan-isationswithinasinglereportingperiod,makingthemcomparablewithineithertheirsectororgeography.Thiscanbeachievedbyusinginternationalorsectoralstandardsthatpromoteconsistentapproachesacrossthemarket.Additionally,dataneedstobeclearandunderstandabletotheusertomakeitdeci-sion-useful.Byusingplainlanguagethatisfreefromjargonandensuringthatreportsareeasytonavigateandread,organisationscaneffectivelycommunicatewiththeintendedaudience.Finally,datathatisverifiableminimisestheriskofmisstatementorbias.Verifiableinfor-mationischaracterisedasinformationthatcanbetestedandconfirmed.Thiscanbeachievedbyprovidingsupportingevidenceofthedatatrailfromsourcetofinaldisclo-sure,includingthesystemsandprocessesinplace.Byhavingrobustanddocumenteddatastructuresandprocesses,organisationsshouldbeabletotracedatatoverifyitsaccuracyandvalidatetheconclusions.MainstreamreportingandfinancialmaterialityThe“mainstreamreport”,or“mainstreamfinancialreport”,isthepubliclyavail-ableannualreportingpackageinwhichorganisationsarerequiredtodelivertheirauditedfinancialresultsunderthecorporate,complianceorsecuritieslawsofthecountryinwhichtheyoperate(CDSB,2019a).Themainstreamreportisfunda-mentaltoefficientcapitalallocationasitprovidescapitalproviders(i.e.,investorsandlenders)withmaterialinformationabouttheperformance,positionandfutureprospectofanorganisation.Informationasdeemedmaterialtocapitalproviders“ifomitting,misstatingorobscuringitcouldreasonablybeexpectedtoinfluencedecisionsthattheprimaryusersofgeneralpurposefinancialreportsmakeonthebasisofthosereports,whichprovidefinancialinformationaboutaspecificreportingentity.”(IASB,2021).TheTCFDalsorecommendsthatorganisationspreparingtodiscloseclimate-re-latedfinancialdisclosuresshouldincludethisinformationinthemainstreamreporttoenhancetheunderstandingofclimate-relatedrisksandopportunitiesforcapi-talproviders.Theyalsonotethattheinternalprocessesandcontrolsusedinthepreparationanddisclosureofmainstreamreportsshouldbeappliedtoclimate-re-latedinformationtopromoterigourandcredibility(TCFD,2017).Itisthereforevitalthatdisclosuresofclimate-relatedfinancialinformationarepresentedinthemainstreamreportalongsideandconnecttofinancialinformation.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure244.PracticalstepstowardsdisclosureThissectionprovidesguidanceonhoworganisationscangetstartedwiththeTCFDrecommendationsandeachofthefourcoreelements,includinghowtoadjustorcreateinternalprocesses,designactionplans,anddiscloserelevantinformationinannualreports.Eachsectionintroducespracticalactionstheorganisationscantake,answerssomefrequentlyaskedquestions,andprovidesexamplesofdifferentapproachestakenbybanksfromaroundtheworld.FinancialinstitutionsinVietnamcanusethisguidancetobuildrobustclimate-relatedprocessestoappropriatelyidentifyandmanagetheirexposuretothetransitionandphysicalrisksoutlinedinChapter2ofthisreport.Thesuggestedactionsareillustrative,butitisimportanttonotethateachorganisationisuniqueandhasspecificcharacteris-ticsandcontext,includingitssizeandstructure.Therefore,eachorganisationwillneedtodecidethebestcourseofactionandwheretobegin.Thetablebelowprovidesanoverviewofthekeyquestionsthatthisguidancesectionseekstoanswer.Eachofthequestionsinthetableareexpandeduponwithspecificexamplesand/ordetailedinformationtoassistfirmsindevelopingtheirTCFDreports.Table1:SummarytableofkeyquestionsSub-sectionorTCFDpillarKeyquestionGettingstartedWhereshouldwebegin?WhointheorganisationshouldleadtheimplementationoftheTCFDrecommendations?GovernanceHowinvolvedshouldseniorleadershipbeinthisprocess?Howdoweengagewithseniorleadershiponthistopic?Whatdoes“good”corporategovernanceonclimate-relatedmatterslooklike?StrategyHowdoyouidentifymaterialclimaterisksandopportunities?Howdowestartascenarioanalysis?Whichscenariosshouldbeusedinscenarioanalysis?Whatdatashouldbeused?Andwherecanthisdatabefound?Arethereanyresourcesthatcanhelpusstartascenarioanalysis?Whatare“transition”plans?RiskmanagementWhatarethespecialcharacteristicsofclimate-relatedrisksthatneedtobeconsideredintheriskmanagementprocess?Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure25Howshouldclimate-relatedrisksbeintegratedintoexistingriskmanagementprocesses?Howareclimate-relatedrisksdriversofexistingrisks?Isthereanyguidanceonclimate-relatedriskmanagementprocesses?Metrics&targetsWhatmetricsshouldweuse?Howdowecollectanddisclosematerialmetrics?WhatGHGemissionsshouldwecalculateanddisclose?Whatshouldourtargetsbe?Howdoweobtainthedataneededtoreportmetricsandsettargets?AdditionalconsiderationsHowmuchinformationshouldbedisclosed?Howcanclimate-relatedinformationbeconnectedtofinancialinfor-mation?WhatmilestonesshouldwefollowindevelopingandwritingourTCFDreport?4.1GettingstartedWithanumberofcomplexelementsthatreportingorganisationsneedtoconsiderinordertodisclosedecision-usefulclimate-relatedinformation,itcanbedifficulttoknowwheretogetstarted.Beforemeaningfulclimate-relatedinformationcanbedisclosed,anorganisationmustfirstconsidertheinternalstructuresandprocessesandintegrateclimateassessmentandmanagementintoitsbusinessactivities.Figure11presentsthepracticalstepscompaniesmighttaketoprepareforreportinginformationthatisalignedwiththeTCFDrecommendations.ThisdiagramisbasedonthechecklistforlayingthegroundworkforeffectiveTCFDaligneddisclosures—whichhighlightselevenpreliminarystepsorganisationscantaketointegratetheTCFDrecommendationsandpreparefordisclosure(CDSB&SASB2019).Buildingonthischecklist,thisguidancewilldiscussthesestepsinmoredetail.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure26Figure11:Practicalstepstowardsimplementation.Source:CDSBand&SASBTCFDImplementationGuide(2019).Whereshouldwebegin?ItisimportanttorecognisethatitwilltaketimetoimplementalltheelementsoftheTCFDrecommendations,andthereforereportingorganisationsarenotexpectedtocompleteeverythingimmediately.Takingaphasedanditerativeapproachtowardsimplementationisausefulwaytobreakdowntheelementsintomanageableparts,espe-ciallywhentechnicalcapacityandresourcesmaybelacking.Thisiterativeandphasedapproachwillrequireaclearplanforimplementation,whichaccountsforandmanagestheorganisation’slimitationsbystructuringtheactivitiesthatneedtohappenacrossadefinedtimeframe.Ideally,thisplanshouldbecommunicatedinthedisclosuretodemonstratewheretheorganisationplanstoaddressgapsindisclosure.Inmanycases,anorganisationisnotstartingfromzeroandtheyshouldleverageexist-inginternalstructuresandprocesses,especiallyiftheyalreadyincludeclimate-relatedmatters.Bycompletingagapanalysisofexistingprocessesanddisclosures,organisa-tionscanidentifywhatisalreadyinplaceandwhatneedstobeamendedorwherenewsystemsneedtobeestablished.Whencompletingthisgapanalysis,organisationsmayaskthefollowingquestions:◾Doestheboardhaveadelegatedsustainability/CSRcommitteethatcouldincludeclimate-relatedrisksandopportunitiesinitsoversightmandate?◾Whatistheexistingenterprise-wideriskmanagementprocess?Howcanthisbeadaptedtoincludeclimate-relatedrisks,ordoesanewprocessneedtobedeveloped?◾Areyoualreadycapturingclimate-relateddata?Ifyes,howcanthisdatabeusedforthepurposeofTCFDreporting?Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure27◾DoyoureporttoCDPorotherreportingframeworks?CDPhasalignedtheirques-tionnairetoincludetheTCFDrecommendations,andotherreportingorganisations,includingtheGlobalReportingInitiative(GRI)andVRF,havealsomappedtheirresourcestotheTCFDrecommendations.Anotherconsiderationconcernswhichteamswillbeinvolvedinthedraftinganddevel-opmentoftheTCFDreport.AstheTCFDframeworkaimstoprovideperspectivesonthemanagementofclimaterisksandopportunitiesthroughoutanorganisation,manydifferentgroupswillhaveimportantinputsintothereportingprocess.Theseincludeseniormanagement(discussedbelow),businesslinestaff,modellingteams,andmanyothers.However,whenitcomestothedraftingofthereportitself,afewspecificteamsaretypicallygivenresponsibilityforitscompilation.Dependingontheorganisation,teamsresponsiblefordraftingTCFDreportsareusuallypartofthesustainabilityortheriskfunction.Morespecifically,enterprisesustainabilityriskmanagement(ESRM)andclimateriskfunctionsarecommonlyinvolvedinthedevelopmentofthereport.Wherethesededicatedteamsarenotyetestablished,TCFDreportdraftingbecomesapart-timeresponsibilityofadiversesetofsustainabilityandriskcolleagues.WhointheorganisationshouldleadtheimplementationoftheTCFDrecommendations?Climate-relatedmattersareoftencharacterisedasanESGissue,andthereforeareplacedwithinsustainabilityfunctionstomanage.However,theTCFDrecommendationscoverandconnectdifferentbusinessfunctionsandwillthereforerequireinputacrosstheorganisation.Forexample,alongsidethesustainabilityfunction,thefinanceandaccounting,andriskmanagementfunctionswillneedtobeinvolvedinimplementingtheTCFDrecommendations.Ultimately,who“leads”ontheimplementationoftheTCFDwilldependontheorganisation’sstructureandtechnicalcapacityandshouldbeaddressedacrosstheorganisationratherthaninjustonedepartment.Organisationsshouldconsiderforminganinternalworkinggrouptobringtogetherotherfunctionsanddepartments.Differentprofessionalexperienceandskills,aswellasdiffer-entworkingknowledgeofthebusiness,arekeyinunderstandingtheorganisation’sexposuretoclimate-relatedrisksandcanimprovetheorganisation’soverallapproachtoclimate-relatedrisk.Iftheorganisationhasdifferentdivisions,itwouldbeprudenttoalsoincluderepresentativeswhounderstandeachofthebusinessunitstoensureallelementsofthebusinessareconsideredduringimplementationprocess.Differentorganisationsmaytakedifferentapproachestosettingupinternalworkinggroups,including“topdown”approacheswhereseniorleadershipdirectthestrategy,or“bottom-up”approacheswherefunctionsanddepartmentscometogethertodevelopaplan.Ineitherapproach,itisimportanttoestablishaclimate/TCFD“Champion”,prefer-ablyinseniormanagementorontheboard,whocansetthetonefromthetopandleadonsettingandapprovingtheTCFDimplementationstrategy.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure284.2GovernanceTodemonstrateorganisationsareadequatelyaddressingclimate-relatedrisksandopportunities,itisimportantfororganisationstoreporttheroleoftheboardandseniormanagementinoverseeingandmanagingtheseissues,includingwhethertheyaregivenappropriateattentionindecision-makingprocesses.Withintherecommendations,theTCFDdistinguishesbetweenclimate-relatedoversightandmanagement,whicharebothimportantforinvestorstomakeassessmentsaboutthelevelofengagementthroughouttheorganisation.Notonlyshouldorganisationsdisclosehowinvolvedtheboardandseniormanagementareinidentifying,assessing,andmanagingclimate-relatedrisksandopportunities,buttheyshouldalsodemonstratehowtheseissuesareincorporatedwhensettingthebusi-nessstrategy,majorplans,riskmanagementpolicies,andannualbudgets.Theseissuesshouldalsobeincorporatedwhenreviewingandmakingdecisionsontheorganisation’sperformanceobjectivesandmajorfinancialplans,includingsignificantcapitalexpendi-tures,acquisitions,anddivestitures.TheTCFDrecommendationsandreportingrequirementsforgovernancearestructuredasfollows:Disclosetheorganisa-tion’sgovernancearoundclimate-relatedrisksandopportunities.a)Describetheboard’soversightofclimate-relatedrisksandopportunities.b)Describemanagement’sroleinassessingandmanagingrisksandopportunities.Howinvolvedshouldseniorleadershipbeinthisprocess?Ultimately,seniorleadership,includingtheboardandseniormanagement(i.e.,execu-tives),isaccountabletoshareholdersforthelong-termresilienceofthebusiness,includ-ingitsresponsetoclimatechange.AlthoughtheTCFDhaveaspecificrequirementforgovernancedisclosures,settingupeffectivegovernancestructuresandprocessesisimportantforallelementsoftherecommendations.Withoutseniorleadership“buy-in”,itwillbedifficultfortheorganisa-tiontoembedalltheelementsoftherecommendationsandreportontheoutcomestothemarket.Theboardmaynothaveday-to-daymanagementresponsibilities,butthereisanexpec-tationthat,attheveryminimum,theyareawareofthepotentialfinancialimplicationsofclimatechangefortheorganisationandareregularlyinformedaboutitsperformanceandposition.Thiswillrequireclearlydefinedinformationflowsandoversightmechanismsbetweentheboard,seniormanagementandthewiderbusinessfunctionsandunits.Thiswillincludethefrequencyforwhichclimate-relatedinformationissharedwiththeboardandhowoftenclimate-relatedmattersareincludedintheirquarterlymeetingagendas.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure29Theseniormanagementwilllikelyhavegreatermanagementresponsibilitiesoverthesematters.Theorganisationshouldidentifyeitheranindividual(e.g.,CEO)ordelegatedmanagementcommitteewhohasresponsibilitytomanageclimate-relatedmattersacrossthebusiness.Theirresponsibilitiesshouldinclude(butnotlimitedto)oversightoftheriskmanagementprocess,strategicdecision-making,andapprovingandmonitoringtargetsandtheirassociatedmetrics.Thereshouldalsobeaclearinternalgovernancestructureinplace,whichalsocoversthewiderbusinessfunctionsandunits.Thisinternalstructuremayincludeexistingcommitteesandfunctions,butmayalsoincludenew,dedicatedbodiestoaddressthesetopics.Therolesandresponsibilitiesofthoseinthegovernancestructureshouldhaveclimate-relatedmattersincludedintheirmandates,whichshouldbedocumented.Figure12:Exampleofgovernancestructure.Source:BankofAmerica’sTCFDReport(2020)onpage19.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure30Howdoweengagewithseniorleadershiponthistopic?Havingseniorleadershipinvolvedandengagedintheseprocessesisessentialifanorganisationistosuccessfullyembedclimatechangeintotheorganisation-widegover-nanceandriskmanagementprocesses.Crucialtotheengagementofseniorleadershipiseducation.Attheveryleast,theboardandseniormanagementshouldbeinformedaboutthebasicsofclimatechange,itsriskmanifestations,andthepotentialimplicationstothebusinessmodelandstrategy.Giventhecomplexityofclimatechange,itmaynotbethatseniorleadershipbecomeexpertsinthisfield,butitisrecommendedthattheytakethenecessarystepstoensuretheyaresufficientlyinformedabouttheclimate-relatedrisksandopportunitiesthattheirbusinessisexposedto.Organisationsmayalsodecidetoalignincentivisationandremunerationpolicieswithclimate-relatedmetricsandoutcomes.Thiscouldentailanassessmenttoaddresswhereexistingincentiveschemesmayneedtobeamendedtoensurethattheyarealignedwiththebusiness-wideclimatechangestrategy.Includingclimate-relatedmattersintoincentivisationandremunerationpoliciesdemonstratesthecommitmentandaccountabilityofboththeorganisationanditsseniorleadership.Whenconsideringhowtoincorporateclimate-relatedmattersintothesepolicies,theorganisationmayconsiderlinkingtheincentivisationandremunerationpoliciestorelevantbenchmarks(e.g.,CDPorDJSI)andthemattersmostpertinenttotheorganisation,reflectingtheoutcomesofitsriskandopportunityidentificationprocess.Whatdoes“good”corporategovernanceonclimate-relatedmatterslooklike?Thereisalreadyplentyofguidancetohelporganisationsdeveloprobustgovernancestructuresandprocessesonclimate-relatedmatters:◾WorldEconomicForum(incollaborationwithPwC),HowtoSetUpEffectiveClimateGovernanceonCorporateBoards:Guidingprinciplesandquestions◾CommonwealthClimateLawInitiative,Theclimateriskreportingjourney:AcorporategovernanceprimerIntheirTCFDreport,theBankofAmericaclearlystatethatclimate-relatedriskisgovernedthroughouttheorganization,butultimatelyresponsibilitylieswiththeChairmanoftheBoardandtheCEO.TheythencontinuetodiscusstherolesandresponsibilitiesoftheCorporateGovernance,ESG,andSustainabilityandtheEnterpriseRiskCommittees,inadditiontodetailsabouthowoftenthetwocommitteesreceiveinformationonkeyandemergingrisks.Thediagramrepresentstheentireclimategovernancestructure,fromtheregionalcommitteesallthewayuptotheBoardofDirectors,witharrowstodemonstrateflowsofinformation.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure31◾WorldBusinessCouncilforSustainableDevelopment,Modernizinggovernance:ESGchallengesandrecommendationsforcorporatedirectors◾InternationalCorporateGovernanceNetwork,ICGNViewpointTheBoardofDirectors&ClimateChange4.3StrategyArguablythisrecommendationiscentraltotheTCFDrecommendations,askingorgan-isationstoidentifyclimate-relatedrisksandopportunitiesandfurtherreportonhowtheseissuesarelikelytoimpacttheoverallbusiness,strategyandfinancialplanning.Thisinformationiscriticaltobeabletoassessthefutureperformanceandpositionoftheorganisationovertheshort-,medium-,andlong-term,andtounderstanditsresil-ienceagainstarangeofplausiblefutureevents.Thisrecommendationasksorganisationstoassesstheimplicationsofclimatechangeontheorganisation’soverallstrategy.Itmaybethecasethatafteridentifyingandassessingtheserisksandopportunities,theorganisationmaychoosetosetaclimatestrategyortransitionplantorespondtotheseissues.AkeypartoftheTCFDrecommendations,andthestrategyrecommendationitself,isthatorganisationsshouldnotonlylookattheirpastandcurrentperformance,butalsothefutureoutlookbyconductingscenarioanalysis.Scenarioanalysisisatoolforstra-tegicdecision-making,wherebyorganisationsassesstheresilienceoftheirstrategyagainstdifferentscenariosandassumptionsofthefuture.Theresultsfromtheanalysisshouldthereforebeusedtoformulatemitigationandadaptationmeasurestoensuretheorganisationispreparedforarangeofplausiblebutuncertainoutcomes.TheTCFDrecommendationsandreportingrequirementsforstrategyarestructuredasfollows:Disclosetheactualandpotentialimpactsofclimate-relatedrisksandopportunitiesontheorganisation’sbusinesses,strategy,andfinancialplanningwheresuchinformationismaterial.a)Describetheclimate-relatedrisksandopportunitiestheorgani-sationhasidentifiedovertheshort-,medium-,andlong-term.b)Describetheimpactofclimate-relatedrisksandopportunitiesontheorganisation’sbusinesses,strategy,andfinancialplanning.c)Describetheresilienceoftheorganisation’sstrategy,takingintoconsiderationdifferentclimate-relatedscenarios,includinga2°Corlowerscenario.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure32Howdoyouidentifymaterialclimaterisksandopportunities?TheTCFDrequiresorganisationstoidentifythematerialclimaterisksandopportunities,andthefinancialimpactsthesemayhaveonthebusiness.Toidentifytheserisksandopportunities,theorganisationmayinitiallyconductqualitativeresearchthatconsiderstheeffectsofclimatechangeanddecarbonisationwithinthecontextinwhichtheorgan-isationoperates,includingthegeographical,regulatoryandsectoralcontextsthatmightcreateorexacerbatetheirexposuretorisksandopportunities.Forthebankingindustrythisshouldincludethegeographicalandsectoralcompositionoftheirlendingportfolioandotherfinancialrisks.Eachorganisationisuniqueandwillbeexposedtospecificrisksandopportunitiesbasedonthesecontextualfactors,andbyidentifyingthematthebeginningoftheprocess,theorganisationwillbeabletofocusanyassessmentontherisksthataremostimportanttotheorganisation.Identifyingclimate-relatedrisksandopportunitieswillrequirebothanassessmentofpastclimate-relatedtrends,inadditiontoreviewingcurrentscientificevidenceofthefutureeffectsofclimatechange—bothtransitionandphysicalrisks.TheTCFDcate-gorisesclimate-relatedrisksintotwogroupings(physicalandtransitionrisks),whicharefurthercategorised(Table2).Organisationsshouldusethesecategoriestoidentifymaterialrisks,andcanusethequestionsinthetablebelowasastartingpoint.GuidanceReport:Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureforVietnam’sFinancialSectorPracticalstepstowardsdisclosure33Table2:Climate-relatedrisksandkeyconsiderations.RiskcategoryRiskdescriptionConsiderationsfororganisationsTransitionrisksTransitionrisksarisefromthetransitiontoalow-car-boneconomy.Thismightincludeimpactsresultingfrompolicy,legal,technol-ogyandmarketchanges.Dependingonthenature,speed,andfocusofthesechanges,transitionrisksmayposevaryinglevelsoffinan-cialandreputationalrisk.PolicyandLegalRisksTheserisksincludepoliciesthatattempttorestrictactionsthatadverselycontributetoclimatechange.Forexample,theintroductionofcarbon-pricingmechanismscouldpresentfinancialriskifitsignificantlyincreasesoperatingcosts.Addi-tionally,legalrisksrelatetolitigationactionsagainstorgan-isationsthatfailtomanageormitigatetheircontributiontoclimatechange.Whatarethenationalclimatetargetsofthecountriesinwhichyouoperateandinvestin?Arethereanycurrent,orexpected,regulatoryrequirementsorpoliciesinthecountriesinwhichyouoperate?Isthereanyexposuretocarbonpricingacrossthedifferentregionsinwhichyouoperate,andhowwillthisevolve?Areyouexposedtoanyactivities,directlyorthroughthelend-ingportfolio,thatcouldbethetargetoflitigation?TechnologyRiskTechnologicaldevelopmentsarecrucialtomeetinternationalclimategoalsandtoenablethetransitiontoalow-carboneconomy.Thismayhaveadverseimpactsonorganisations,especiallyinrelationtothespeedinwhichnewtechnologiesaredevelopedanddeployed.Areyouexposedtoexpectedtechnologicalchanges,espe-ciallythroughfinancingactivities?Howwillyourportfoliosbeimpactedbythecostcompetitive-nessofcoalagainstrenewabletechnologiesastheycontinuetodevelop?Doyoufinancesectors,suchastransportationandagricul-ture,thatmaybedisruptedbyincreasinguseoflow-carbontechnologies?MarketRiskThereareseveralwaysinwhichmarketscouldbeaffectedbyclimatechange,includingshiftsinsupplyanddemandforcertaincommodities,products,andservices.Aretheproductsandservicesyouofferconsideredinlinewithinternationalclimatechangecommitments?Howwillconsumerdemandchange,andwhatwillthismeanforyourrevenuestreams?ReputationRiskChangingcustomerperceptionscouldleadtoreputationalrisks,especiallyinrelationtothepoliciesandactionstakenthatmaycontributeordetractfromthetransitiontoalow-carboneconomy.Howareyoucommunicatingthecurrentandplannedactivi-tiesyouaretakingtowardspositiveclimateaction?Whatisthecompositionofyourportfoliosinrelationtodiffer-entsectors,andarethereanythatcouldbestigmatised?GuidanceReport:Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureforVietnam’sFinancialSectorPracticalstepstowardsdisclosure34RiskcategoryRiskdescriptionConsiderationsfororganisationsPhysicalrisksPhysicalrisksarisefromthechangesinweatherpatternsandlong-termclimate.Theseriskscanbeeventdriven(acute)orlonger-termshifts(chronic)inclimatepatterns.Physicalrisksmayhavefinancialimplicationsfororganisationsthroughdirectdamagetoassetsorthroughimpactsfromsupplychaindisruption.AcuteRiskAcutephysicalrisksrefertothosethatareevent-driven,includingextremeweatherevents,suchascyclones,hurri-canes,orfloods.Theserisksareusuallyseasonalevents,thatmightincreaseinseverityandfrequencyduetochangesinatmosphericconditions.Whatisthecompositionoffinancingportfolioinrelationtogeographicalspread?Arethereanylocationsthataremoreexposedtophysicalrisks?Howmighttheserisksaffectborrower’sdefaultrisk,andisthiscurrentlybeingconsideredinlendingpolicies?ChronicRiskChronicphysicalrisksrefertolonger-termshiftsinclimatepatternsduetoglobalwarming,whichmaycausesealevelriseorchronicheatwaves.Source:AdaptedfromTCFD(2017)Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure35Itiscommonforcompaniestofocusprimarilyonrisk.However,climatechangeandthetransitiontoalow-carboneconomymayofferopportunitiesthatcouldinfluencebusi-ness-widestrategiesandfinancialplanningprocesses.Forbanks,thismayrelatetothegrowingdemandforsustainablefinanceproductsandservices,includinggreenbondsandloans,thatfocusonprovidingcapitalfordecarbonisationtechnologiesorlow-carboninfrastructure.Theseproductsarebecomingincreasinglycompetitive,andbankscanpositionthemselvestonotonlybenefitfromthesebutcanalsoinfluenceandhelpclientadapttolow-carbonexpectations.InVietnam,thereareanumberofopportunitiesassociatedwithtransitioningtorenewableenergiesasdemandincreasesforfinancinginfrastructureprojectsandthedevelopmentanddeploymentofnewtechnologies.Howdowestartascenarioanalysis?Conductingascenarioanalysisiscomplexandwilltaketimetocomplete.Theultimategoalisfororganisationstousescenarioanalysistoassesstheorganisationasawhole,includingthevaluechain.However,forthosenewtoscenarioanalysis,itisoftenprac-ticaltobeginwithananalysisthathasafocusedscope.Forexample,followingdesk-basedresearchorsuitableguidance,theinitialanalysismayfocusontheimpactsofaspecificrisk,geographicregion,criticalbusinessunitorsegmentofaportfolio.Figure13:Exampleofclimate-relatedrisks.Source:BBVAReportonTCFD(2020)onpage18.BBVAhaveidentifiedclimate-relatedrisksinlinewiththecategorisationsetoutbytheTCFDrecommendations.Theriskshavebeenpresentedinaneasytonavigatetable,includingadescriptionofhowtheserisksimpactthebusiness.Thistableisalsohelpfulaseachriskhasbeenmappedtoatimehorizon,whichisclearlydefinedinthetableheading.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure36Itisimportanttorecognisethatcompletingscenarioanalysisisaniterativeprocessandorganisationsshouldexpecttodevelopandimprovetheanalysisonaregularbasistoreflectscientificandregulatorydevelopments,particularlyaswarmingtrajectoriesplayoutinthereal-world.Initialscenariosmayalsobeginwithqualitativenarrativescenar-iostoenabletheorganisationtoexploretherangeofpotentialclimatechangeimpacts.Moresophisticatedanalysiscanthenusequantitativemodelsanddatasetstobegintoaddressthefinancialimplicationsofdifferentwarmingscenarios.Whichscenariosshouldbeusedinscenarioanalysis?TheTCFDrecommendthatorganisationsshouldusemultiplescenariostocaptureawiderangeofassumptionsaboutuncertainfutureoutcomes.Thescenariosthatarechosenwilldependonthescopeandobjectiveoftheanalysis.Inparticular,organisationsshouldincludescenariosthatrepresentdifferentwarmingpathways,whichmightinclude1.5°C,2°C,3°Cor4°Cscenarios,acrossmultipletimehorizons.Thesedifferentwarmingpathwaysmayeachbeassociatedwitharangeofdifferenttransitionpathways(e.g.,steadyandconsistentactionordelayedanddrasticaction).Byexploringawidevarietyoffuturesanddifferentpathways,organisationswillbetterunderstandtherangeofpossibleoutcomesandthereforebeabletodevelopthemosteffectiveandefficientstrategies.Somebelievethatasinglescenariocanbeusedtomodelallclimate-relatedrisks,includ-ingbothphysicalandtransitionrisks.However,thisisacommonmisconceptionastheserisksaredistinctandwillrequiredifferentdatainputs,andthereforeshouldbeconsideredindependentlyofeachother.Transitionriskscenariosneedtoconsiderawiderangeofdataaboutfuturetechnologicaldevelopments,energyoutlook,andmacroeconomicassumptions.Physicalriskscenariosareequallycomplexastheymodelalargenumberofvariablestounderstandchangesinatmosphericconditionsonaglobalscale.AsetofscenariosthatmightbeparticularlyhelpfularethesuitescenariosdevelopedbytheNGFS.Thesescenariosaredesignedtoprovidedataonbothtransitionandphysicalrisks,andtheassociatedeconomicimpacts(NGFS2020).Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure37Whatdatashouldbeused?Andwherecanthisdatabefound?Whenconductingscenarioanalysis,decision-usefuloutputsdependonhavinggooddatainputs.Thismeansorganisationsshouldconsidertherangeofdataneededtobeabletoconductcomprehensiveriskassessments.Forexample,scenariodatashouldbesourcedfromcredibleprovidersofclimatetransitionscenarios,suchasthoseusedbytheNGFSandincludedinIPCCreports.Withinthesescenarios,macro-leveldatainputsarehelpfultoallowtheorganisationtoassesstherisksinthecontextofglobalmodels,butadditionallydataontheimpactsofclimateonlocalareasallowsorganisationstoobtaingranularityintheassessment.Thereareanumberoffreelyavailabledatasourceswhichcanbeusedtoassessthefutureclimate-relatedimpacts.Theseincludebothsourcesforphysicalriskandtransi-tionriskdataatglobal,regional,andnationallevelsofgranularity.Figure14:Exampleofphysicalscenarioanalysis.Source:ANZClimate-RelatedFinancialDisclosure(2020)onpage7.Inthisexample,ANZhavefocusedthescenarioanalysisontheagriculturalloanbookandthefutureimpactfromchangesinweatherpatterns,particularlyinrela-tiontodroughtandrainfallvariations.ANZdescribetheworkingrelationshipwiththeAustralianBureauofMeteorologywhoprovidethedata,andhowcustomersareevaluatedintermsoffinancialresiliencetoextremeweatherevents.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure38Table3:PhysicalriskdataresourcesDataSourcePhysicalhazardscoveredGeographicalCoverageCDPOpenDataPortalStorms,extremeheat,seawaterintrusion,drought,flood,forestfireGlobalcoverageofCDPcitiesClimateCentralExtremesealevels,stormsurgedata,hightideevents,coastalflooding,sealevelschangesandseverewindsGlobalClimateAnalyticsClimateImpactExplorerTemperaturerise,seasonalprecipitation,sealevelrise,extremeweatherevents,suchasfloods,droughtsandheatwavesGlobal,countryleveldataincludedaswellGFDRRThinkHazard!Extremeheat,flood,earthquake,landslide,sealevelrise,waterscarcity,wildfireGlobalGoogledatasetsearchHurricane,sealevelrise,temperatureriseGlobalINFORMindexVarietyofquantitativefactorsandresourcestosupportphysicalriskassessmentsGlobalIPCCAssessmentReport6:Impacts,Adaptation,VulnerabilityLatestreportonimpactsofphysicalhazards,adaptation,andvulnerabilitiestoclimatechangeGlobalIPCCAssessmentReport6:ThePhysicalScienceBasisAllmajorphysicalriskhazardscoveredinreportGlobalKNMI—ClimateExplorerTemperature,droughts,cyclone,precipitationGlobalOasisHubFlooding,cyclone,earthquake,extremeweather,landslideGlobalPREPdataTemperaturerise,precipitation,coastalrisk,waterriskandotherextremeeventsGlobalcoveragewithlowgranularityforspecificcountriesUNEPGlobalRiskDataPlatformTropicalcyclones,stormsurges,drought,earthquakes,fires,floodsandlandslidesGlobalWorldBankClimateChangeKnowledgePortalTemperaturerise,seasonalprecipitation,sealevelrise,extremeweatherevents,suchasfloods,droughtsandheatwavesGlobalWRIAqueductWaterRiskAtlasWaterrisks,includingfloodanddroughtriskGlobalUNFCCCAdaptationandResiliencyResourcesDatabaseofdatabasesonrelevantadaptationandresiliencystudiesandmeasuresGlobalandnationalVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure39Table4:TransitionriskdataresourcesDataSourceTransitionRisksCoveredGeographicalCoverageCAITClimateDataExplorer(byWRI)GHGemissions,emissionpathways,pledges,targetsGlobalCDPOpenDataPortalGHGemissionsGlobalEn-ROADSsimulatorDifferentemissionspathwaysanddriversoftempera-tureriseGlobalGreenhouseGasProtocolProductlifecycleandcorporatevaluechain(Scope3)GHGinventoriesGlobalIEANetZeroby2050scenarioPolicy,technology,andmarketrisksbasedontheIEA’snetzeroby2050scenarioGlobal,breakoutsbyregionatahighlevelIIASAscenarioexplorerPolicy,technology,andmarketrisksbasedonawiderangeofIPCC1.5°CscenariosGlobal,regional,andnationalatvaryingdegreesofspecificityIMFWorldEconomicOutlookMacroeconomicforecasts/scenariosthatcanbeusedtounderstandpotentialpolicy,technology,andmarketshiftsGlobal,regional,andnationalIPCCemissionsfactordatabaseEmissionfactorsforvariousactivitiesGlobalwithsomeregionalvariationNGFSscenarioportalPolicy,technology,andmarketrisksbasedontheNGFSscenariosGlobal,break-outintospecificregionsandnationalleveldownscalingSENSESprojectonclimatescenariosPolicy,technology,andmarketrisksbasedonawiderangeofIPCC1.5°CscenariosGlobalTheCarbonMoni-toringforAction(CARMA)databaseGHGemissionsestimatesforpowerplantsUnitedStates,EuropeanUnion,Canada,India,andSouthAfricaanddatafromtheInter-nationalAtomicEnergyAgencyTheLowdownv2.0CoalcapacityforcountriesGlobalUNdataMethane,Carbondioxide,HFCs,Nitrousoxide,Nitrogentrifluoride,PFCs,Sulphurhexafluoride43countrieshoweverdataisonlyavailablefor29yearsVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure40Arethereanyresourcesthatcanhelpusstartascenarioanalysis?LiteraturehelpinginstitutionstoconductscenarioanalysishasincreasedgreatlysincethereleaseoftheTCFDrecommendations.Inparticular,UNEPFIhaveproducedanumberofreportstoassistfinancialinstitutionsinconductingscenarioanalysis,including:◾ExtendingourHorizons:AssessingCreditRiskandOpportunitiesinaChangingClimate(Part1:Transition-relatedrisksandopportunities)◾NavigatingaNewClimate:AssessingCreditRiskandOpportunitiesinaChangingClimate(Part2:Physical-relatedrisksandopportunities)◾ChartingaNewClimate:State-of-the-arttoolsanddataforbankstoassesscreditrisksandopportunitiesfromphysicalclimatechangeimpacts◾TheClimateRiskLandscape:MappingClimate-relatedFinancialRiskAssessmentMethodologies◾PathwaystoParis:APracticalGuidetoClimateTransitionScenariosforFinancialProfessionals◾DecarbonisationandDisruption:UnderstandingtheFinancialRisksofaDisorderlyTransitionusingClimateScenariosWithintheClimateRiskLandscapereport,UNEPFIprofiledanumberofthird-partydataproviderswhosetoolsassistfinancialinstitutionsinmakingtransitionandphysicalriskassessments.Thelistoftoolsbelowisnon-exhaustive.Table5:SelectedlistofphysicalrisktoolsServiceproviderToolBlackRockBlackRock’sAladdin®platformCarbonTracker2DegreesofSeparationCLIMAFINClimateRiskAssessmentPlatformISSESGPhysicalRiskSolutionJBARiskManagementClimateChangeFloodModelMcKinsey/PlanetricsPlanetrics'PlanetViewPlatformMoody's/RMSClimateSolutionsMorningstarSustainalyticsPhysicalClimateRiskMetricsMSCIInc.ClimateValue-at-riskMunichReLocationRiskIntelligenceOrtecFinanceClimatePREDICTPricewaterhouseCoopersGmbHClimateExcellencePhysicalRiskS&P(TheClimateService)ClimanomicsSASClimateRiskOfferingSouthPoleClimateriskdeepdiveassessmentSustGlobalClimateExplorerWillisTowersWatsonBespokePhysicalRiskAnalyticsXDISystemsXDIHub1in1000Initiative2°InvestingInitiativeandtheOxfordSustainableFinanceGroupattheUniversityofOxfordPRISKmoduleVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure41Table6:SelectedlistoftransitionrisktoolsServiceproviderToolBlackRockBlackRock’sAladdin®platformCLIMAFINClimateRiskAssessmentPlatformEntelligentT-RiskICEClimateTransitionAnalyticsPlatformISSESGTransitionValueatRiskMcKinsey/PlanetricsPlanetrics'PlanetViewPlatformMoody's/RMSClimateSolutionsMorningstarSustainalyticsLowCarbonTransitionRatingMSCIInc.ClimateValue-at-riskOliverWymanandS&PClimateCreditAnalytics(CCA)OrtecFinanceClimateMAPSinpartnershipwithCambridgeEconometricsPricewaterhouseCoopersGmbHClimateExcellenceTransitionRiskS&P(TheClimateService)ClimanomicsSASClimateRiskOfferingWillisTowersWatsonWTWClimateTransitionValueatRisk1in1000Initiative2°InvestingInitiativeandtheOxfordSustain-ableFinanceGroupattheUniversityofOxfordPRISKmoduleWhatare“transition”plans?Inthe2021updatedimplementationguidance,theTCFDintroducetherecommendationfororganisationstoproducetransitionplans.WhereorganisationshavecommittedtoreducingGHGemissionsand/orhaveidentifiedsignificanttransitionrisks,theyshoulddescribetheplannedactivitiesformeetingthesecommitmentsandtransitioningtoalow-carboneconomy.Connectedtotheorganisation’soverallbusinessstrategy,thetransitionplanshouldoutlinehowtheorganisationplanstoachievetheirclimate-relatedtargets,includingoutlininganyinitiativesandactivitiestheorganisationisplanningtotake.Progressagainstthesetargetsshouldberegularlymonitoredandcommunicatedtothehighestgoverningbodythatisresponsibleforapprovingandhasoversightoftheplan.TheTCFDhaveproducedadditionalguidancetohelporganisationsprepareanddisclosetransitionplans.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure424.4RiskmanagementWhentryingtounderstandhowanorganisationoverseesandmanagesclimate-relatedrisks,itisimportanttoknowwhatprocessesareusedtoidentify,assessandmanagetheserisks,andhowtheseprocessesareintegratedintoexistingorganisation-wideriskmanagementprocesses.Thiswillenableinvestorstobetterunderstandandevaluateanorganisation’soverallriskprofileandriskmanagementactivities.Althoughclimatechangeposesauniquerisktobanks,theyareexpectedtohaveaholis-ticviewofclimate-relatedrisks,includinghowtheyinterconnectandimpactexistingriskcategories.Itisthereforeimportantthattheserisksareintegratedintooverallriskmanagementprocesses.Withoutarobustandwelldocumentedapproachtoidentify-ing,monitoringandmanagingclimate-relatedrisks,organisationsmaybeunpreparedforunexpectedandsuddeneventsthatcouldimpacttheirfinancialperformanceandposition.Whereclimate-relatedrisksidentification,assessmentandmanagementisnewtoanorganisation,itmightbeprudenttoensuretheriskfunction,includingthegovernancestructuresthatsupporttheriskmanagementprocess,haveafoundationalunderstand-ingofclimatechangeanditspotentialimpacts.Thereisnoexpectationthattheriskfunctionwillbeclimatechangescientistsorexperts,buttheyshouldobtainanappreci-ationofthecomplex,uniqueandsystemnatureofclimatechange.TheTCFDrecommendationsandreportingrequirementsforriskmanagementarestruc-turedasfollows:Disclosehowtheorganisationidentifies,assesses,andmanagesclimate-relatedrisks.a)Describetheorganisation’sprocessesforidentifyingandassessingclimate-relatedrisks.b)Describetheorganisation’sprocessesformanagingclimate-re-latedrisks.c)Describehowprocessesforidentifying,assessing,andmanag-ingclimate-relatedrisksareintegratedintotheorganisation’soverallriskmanagement.Whatarethespecialcharacteristicsofclimate-relatedrisksthatneedtobeconsideredintheriskmanagementprocess?Climatechangebringsauniquesetofspecialcharacteristicsandcomplexvariablesthatshouldbeconsideredbytheriskfunctionastheybegintointegrateclimate-re-latedrisksintoexistingriskmanagementprocesses.Forexample,theeffectsofclimatechangearegoingtodifferdependingonthelocal,regionalandglobalscales,andwillalsodifferacrossdifferenttimehorizonsgiventhelonger-termnatureofclimatechange.Addressingthesespecialcharacteristicswhenintegratingclimate-relatedrisksmayrequireorganisationstoadjusttheexistingprocessesandriskpoliciestoensureitisfullycomprehended.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure43Thetablebelowdemonstratessomeoftheimportantcharacteristicsthatriskfunctionsshouldbeawareof.Table7:Specialcharacteristicsofclimatechange.Source:AdaptedfromTCFD(2020).SpecialcharacteristicsImpactonriskmanagementprocessesGeographicaldifferencesandbusinesscontextThemanifestationsofclimate-relatedriskswilloccuratdifferentlocal,regional,andglobalscales,withvaryingimpactsdependingonthegeographicalareas.Thiswillalsobecompoundedbythecontextinwhichtheorganisationoperates,includingthetypesofproductsandservicesitoffers,themarketsitoperatesin,locationofoperations,andextentofvaluechains.Theriskmanagementprocessesthereforeneedtobeabletodealwithrisksthatmanifestacrossdifferentlocationsandscales,whilstalsoaddressingtheorganisation-specificcircumstance.Theorganisationmayalsosetcriteriaintheriskpoliciestoidentifyspecificbusinessareasthataremoreexposedtotransitionand/orphysicalrisks.TimehorizonsClimate-relatedrisksarealsoexpectedtomanifestacrosstimehorizonsthatgobeyondtraditionalbusinessplanningandlendingcycles.Riskmanagementprocessesmayneedtobeadaptedtoaccountforshort-,medium-andlong-termtimehorizonstofullyaddresstheimpactsofclimatechange.UniqueanduncertainClimatechangeisadynamicanduncertainphenomenonwithnoprece-dentandlimitedhistoricaldata,whichlimitstheabilitytoapplystatisticalandtrendanalysis.Inaddition,theimpactsofmitigationresponsesarealsocomplex,withuncertaintiesaroundthedevelopmentofnewtechnol-ogies,governmentalpolicies,andchangestoconsumerbehaviouranddemands.Whenconsideringfutureuncertainties,theorganisationshouldutilisescenarioanalysistoreviewtheimpactofrisksacrossmultiplefutureconditions.Non-lineardynamicsAsalreadynotedabove,climate-relatedrisksmaymanifestatdifferentscalesovertime,withincreasingseverityandscopeofimpacts.Climatesystemsmayexhibitthresholdsandtippingpointsthatresultinlarge,long-term,abrupt,andpossiblyirreversiblechanges.Additionally,suddenphysicalclimateeventsmayleadtoabruptanddisruptivepolicychanges.Understandingthesensitivitiesoftippingpointsinthephysicalclimatesystem,aswellasinecosystemsandsociety,isessentialforunderstand-ingclimate-relatedrisks.Theriskfunctionshouldeducatethemselvesonthenon-lineardynamicsofclimatechange,andensurethisispartoftheriskassessment.ComplexandsystemicClimate-relatedrisksareinterconnectedacrosssocioeconomicandfinan-cialsystems,duetoknockoneffectsandsystemicimpacts.Climate-re-latedriskscanhavedirectimpacts,butalsoindirectimpactsrequiringriskmanagementprocesstoadoptamultidimensionalperspectivetoassesstheimplicationsfortheorganisation.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure44Howshouldclimate-relatedrisksbeintegratedintoexistingriskmanagementprocesses?Existingriskmanagementprocessesshouldalreadyaddresstheproceduresusedtoidentify,assess,manageandreportmaterialfinancialriskswithinthelimitsofitsriskappetiteframework.Theusualstepsusedintheseprocessesshouldalsobeappliedtoclimate-relatedriskmanagement,ratherthancreatingawholenewsetofprocedures.However,someadjustmentsmaybeneededtothepolicies,risklimitsandriskcontrolstoensuretheseprocessescanbeadaptedtocapturetheglobalandsystemicnatureofclimatechange.Riskmanagementprocessgenerallyincludethefollowingsteps:1.Identifyingthefinancialrisksanorganisationisexposedto.2.Measuringtherisksusingpre-definedmetrics.3.Managingtherisks,includingdecidingiftheriskscanbemitigatedoraccepted.4.Monitoringriskswithafrequencyproportionaltothesizeandthespeedwithwhichtheycanincrease.5.Reportingrisksinternallythroughthegovernanceprocess,andexternallydisclosedecisionusefulinformationtostakeholders.Tohelpintegrateclimate-relatedrisksintoriskmanagementprocesses,theorgan-isationshouldmapclimatechangetotheexistingrisktaxonomytounderstandwhereclimatechangepresentsitsownspecificrisks,andwhereitisariskdriverthatimpactsandexacerbatesexistingriskcategorises.Oncetheorganisationunderstandshowclimate-relatedriskscanbeincludedwiththeexistingrisktaxonomy,theorgan-isationthenshouldconsiderupdatingtheriskinventory.Thismayincludeprovidingfurtherdetailsaboutwhattheriskis,howitislikelytoimpacttheorganisation,theriskresponses,andwhowithintheorganisationhasownershipoftheserisks.Additionalupdatesandadjustmentsmayalsoberequired.Forexample,theorganisationmayconsideradjustingitsriskappetiteframeworktoincludeclimate-relatedrisks,andtosetlimitsonlendingtocertainsensitivesectors,businessesorgeographicalareasthatarehighlyexposedtotheserisks.Alltheseconsiderationsmeanthatorganisationsneedtoconsiderhowclimatechangeisviewedandintegratedintoriskmanagementprocesses.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure45ThisexamplefromHSBCHoldingsdescribestheriskmanagementprocess,includ-ingplanstointegrateclimateriskintotheGroup-wideriskmanagementframe-workandthreelinesofdefencemodel.ThisdisclosurealsoincludesadescriptionofhowHSBChavereviewedtheirriskappetitetoreflectclimate-relatedrisk.Inaddition,HSBCprovideinsightintothegovernanceandmanagementofrisksbydescribingtheboardandmanagementoversight.Alongsidethedetaileddescriptionoftheriskmanagementprocesses,HSBCalsoprovideatabletoillustratehowclimate-relatedrisksmightmanifestacrosstheirexistingfinancialandnon-financialrisktypes.Eachrisktypeisconnectedtoaclimate-relatedriskdriver,andincludesthedefinitionsforshort-,medium-andlong-termtimehorizons.Furtherinthereport,HSBCalsoprovideadditionalinfor-mationabouteachrisktypeandtheprocessesusedtoidentify,assess,manageandreportontheserisks.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure46Howareclimate-relatedrisksdriversofexistingrisks?Althoughclimatechangeisitselfarisk,itisalsoariskdriverandmultiplierwhichmeansthatitwillimpactonexistingfinancialrisks.Inthisregard,withintheexistingriskmanagementframework,organisationsshouldensureclimate-relatedrisksaremappedtotheexistingrisktaxonomyandcategories.Thetablebelowdemonstrateshowbothphysicalandtransitionriskscouldimpactcredit,market,operationalandliquidityrisksforbanks.Figure15:Exampleofriskmanagementprocesses.Source:HSBC’sTCFDUpdate(2020)onpage22–23.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure47Table8:Climatechangeimpactsonexistingriskcategories:RiskcategoriesEffectsofclimateriskdriversCreditrisksCreditriskincreasesifclimateriskdriversreduceborrowers’abilitytorepayandservicedebt(incomeeffect),orbanks’abilitytofullyrecoverthevalueofaloanintheeventofdefault(wealtheffect).Theprobabilitiesofdefaultandlossgivendefaultofexposureswithinsectorsorgeographiesvulnerabletophysicalriskmaybeimpacted,forexample,throughlowercollateralvaluationsinrealestateportfoliosasaresultofincreasedfloodrisk.Energyefficiencystandardsmaytriggersubstantialadaptationcostsandlowercorporateprofitability,whichmayleadtohigherprobabilitiesofdefaultaswellaslowercollateralvalues.MarketrisksReductioninfinancialassetvalues,includingthepotentialtotriggerlarge,suddenandnegativepriceadjustmentswhereclimateriskisnotyetincorporatedintoprices.Climateriskcouldalsoleadtoabreakdownincorrelationsbetweenassetsorachangeinmarketliquidityforparticularassets,underminingriskmanage-mentassumptions.Severephysicaleventsmayleadtoshiftsinmarketexpectationsandcouldresultinsuddenrepricing,highervolatilityandlossesinassetvaluesonsomemarkets.Transitionriskdriversmaygenerateanabruptrepricingofsecuritiesandderiv-atives,forexampleforproductsassociatedwithindustriesaffectedbyassetstranding.OperationalrisksIncreasinglegalandregulatorycomplianceriskassociatedwithclimate-sensitiveinvestmentsandbusinesses.Thebank’soperationsmaybedisruptedduetophysicaldamagetoitsproperty,branches,anddatacentresasaresultofextremeweatherevents.Changingconsumersentimentregardingclimateissuescanalsoleadtoreputa-tionandliabilityrisksforthebankasaresultofscandalscausedbythefinancingofenvironmentallycontroversialactivities.LiquidityrisksBanks’accesstostablesourcesoffundingcouldbereducedasmarketcondi-tionschange.Climateriskdriversmaycausebanks’counterpartiestodrawdowndepositsandcreditlines.Liquidityriskmaybeaffectedintheeventofclientswithdrawingmoneyfromtheiraccountsinordertofinancedamagerepairs.Anabruptrepricingofsecurities,forinstanceduetoassetstranding,mayreducethevalueofbanks’highqualityliquidassets,therebyaffectingliquiditybuffers.Source:AdaptedfromECB(2020)andBasel(2021)Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure48Figure16:Exampleofclimate-relatedrisksasdriversoffinancialrisks.Source:SociétéGénérale’sClimateDisclosureReport(2020),page27.SociétéGénéralefollowtheguidancefromtheECBtodemonstratehowclimate-relatedriskareconsideredanaggravatingfactorforexistingriskcategoriesincludingcredit,market,operational,insuranceandliquidityrisks.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure49Isthereanyguidanceonclimate-relatedriskmanagementprocesses?Thereareanumberofresourcesalreadyavailabletoprovideguidancetoorganisationsonriskmanagementofclimate-relatedrisks.Theseinclude:◾BaselCommitteeonBankingSupervision,Climate-relatedriskdriversandtheirtrans-missionchannels◾TaskForceonClimate-relatedFinancialDisclosures,GuidanceonRiskManagementIntegrationandDisclosure4.5MetricsandtargetsMetricsandtargetsareessentialfororganisationstobeabletomeasureandmonitorperformanceinrelationtoclimate-relatedrisksandopportunities.Bydisclosingthesemetricsandtargetsexternally,organisationscandemonstratetheextentoftheirexposuretoclimate-relatedrisksandhowtheyaremanagingtheserisks.Thesemetricscanalsofacilitateconsistencyandcomparability,especiallybetweensectors.Bothqualitativeandquantitativeinformationisneededtoensureclimate-relatedinfor-mationisdecision-useful.Thedisclosuresunderthegovernance,strategyandriskmanagementcoreelementsareoftenpresentedinnarrativedisclosuresthatdescribeandexplaintherisksandopportunitiesthathavebeenidentified,andtheprocessesthatwereusedtoassessandmanagetheserisks.However,thesedisclosuresshouldbesupportedbyfigurestoillustratetheextentoftheriskexposureandtheprogresstowardsclimate-relatedtargets.IntheupdatedguidancereleasedinOctober2021,theTCFDincludedadditionalfinan-cialmetrics.Theseupdatesrevisedtheguidanceonmetricstoincludemoreexplicitfinancialmetricsthatarecross-industry.Additionalchangesweremadetotheguidanceongreenhousegas(GHG)emissionstoencourageallorganisationstoprovideholisticdisclosures.Theguidancewasalsoupdatedspecificallyforbanks,requiringthedisclosureoftheextenttowhichtheirlendingandotherfinancialactivitiesarealignedwith2°C(orlower)warminggoals,andthedisclosureoffinancedGHGemissionsforlendingandfinancialactivities.TheTCFDrecommendationsandreportingrequirementsformetricsandtargetsarestructuredasfollows:Disclosethemetricsandtargetsusedtoassessandmanagerelevantclimate-relatedrisksandopportunitieswheresuchinformationismaterial.a)Disclosethemetricsusedbytheorganisationtoassessclimate-relatedrisksandopportunitiesinlinewithitsstrategyandriskmanagementprocess.b)DiscloseScope1,Scope2,and,ifappropriate,Scope3green-housegas(GHG)emissions,andtherelatedrisks.c)Describethetargetsusedbytheorganisationtomanageclimate-relatedrisksandopportunitiesandperformanceagainsttargets.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure50Whatmetricsshouldweuse?TheTCFDrecommendasetofcross-industrymetricsthatcreateabaselineforallreportingorganisations(Table9).Somemaybelessapplicabletocertainorganisations,andreportingorganisationsareexpectedtoidentifywhichmetricsarematerialtotheirbusiness.Alongsidethesebasemetrics,theTCFDalsoprovideadditionalmetricsforthebankingindustrytoaddresstheimpactsofclimate-relatedmattersonlendingandotherfinancialactivities.Table9:TCFDrecommendedmetrics,includingbankingsectorspecificmetrics.Cross-industryclimate-relatedmetricsExampleofunitofmeasureGHGEmissionsAbsoluteScope1,Scope2,andScope3;emissionsinten-sity1MTofCO2eTransitionRisksAmountandextentofassetsorbusinessactivitiesvulnera-bletotransitionrisksAmountorpercentagePhysicalRisksAmountandextentofassetsorbusinessactivitiesvulnera-bletophysicalrisksAmountorpercentageClimate-RelatedOpportunitiesProportionofrevenue,assets,orotherbusinessactivitiesalignedwithclimate-relatedopportunitiesAmountorpercentageCapitalDeploymentAmountofcapitalexpenditure,financing,orinvestmentdeployedtowardclimate-relatedrisksandopportunitiesReportingcurrencyInternalCarbonPricesPriceoneachtonofGHGemissionsusedinternallybyanorganisationPriceinreportingcurrency,perMTofCO2eRemunerationProportionofexecutivemanagementremunerationlinkedtoclimateconsiderationsPercentage,weighting,description,oramountinreportingcurrencyBankingsectorclimate-relatedmetricsExampleofunitofmeasureCarbon-relatedassetsrelativetothetotalassetsAmountorpercentageTheamountoflendingandotherfinancingconnectedwithclimate-relatedopportunitiesAmountTheextenttowhichtheirlendingandotherfinancialinter-mediarybusinessactivities,whererelevant,arealignedwithawellbelow2°CscenarioImpliedtemperatureriseorwarmingpotentialSource:TCFD(2021c)Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure51Themetricsthatarechosenshouldreflectthematerialrisksandoutcomesofthescenarioanalysisandconnecttothestrategy.Theyshouldbeusedinternallytoinflu-enceandmonitorthestrategy-settingandriskmanagementprocesses,aswellasbepresentedintheannualreportsforinvestorstoexaminetheorganisationsperformance.Howdowecollectanddisclosematerialmetrics?Whichevermetricstheorganisationhasdeemedasmaterial,theyshouldbepreparedtocollectanddiscloseinthisinformationaconsistentapproachfromyeartoyear.Provid-ingthesamemetric,whichismeasuredthesameway,onayearlybasisallowsfortrendanalysisandprogresstobetracked.Whereorganisationsarenewtoclimate-relatedfinancialdisclosure,challengesarounddatacollectionandmanagementneedtobeaddressedthroughrobustdataprocesses,whichwillneedtobebuiltfromcollectiontodisclosure.Creatingandmaintainingrigor-ousdatapoliciesandprocessesisimportanttoensurethequalityandcredibilityofthedata.Thereshouldalsobedocumentationthatrecordsthemethodologies,processes,systems,assumptionsandestimateswhichareusedincollectingandassessingtheseFigure17:Exampleofclimate-relatedfinancialmetrics.Source:UBSGroupAnnualReport(2020),page42.ThisexamplefromUBSGroupsummarizesthekeymetricsforbothclimate-relatedrisksandopportunitiesinaclearlypresentedtable.FollowingtheguidancefromtheTCFD,UBSGroupprovidedataaboutthecarbon-relatedassets,totalexposuretoclimate-sensitivesectorsandweightedcarbonintensity,inadditiontodataontheamountofclimate-relatedsustainableinvestments.Dataisprovidedforthreeyearsallowingfortrendanalysisandtoassesstheorganizationsperformance.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure52metrics,inadditiontotheinternalcontrolsandchecksthatensurethedatamanage-mentprocessisrobust.Whendisclosingthesemetrics,organisationshouldpresentthedatainaclearandunderstandablemanner,butalsoincludecontextualandsupportingnarrativethatexplainstheperformanceandthebasisonwhichthedatahasbeenprepared.Thisinformationmightincludethemethodologiesanddefinitionsused,thedatasources,criticalfactors,andhowthedataisconnectedtothebusiness-widestrategyandfinan-cialperformance.Figure18:Keyprocessesfordatamanagementandcommondatachallengesforcompanies.WhatGHGemissionsshouldwecalculateanddisclose?GHGemissionsdataisessentialasitunderpinshoworganisationscalculatetheirexpo-suretobothclimate-relatedrisksandopportunities.Forexample,organisationswithhighGHGemissionswilllikelybemoreimpactedbytransitionrisks.TheGHGemissionsdatacollectedandcalculatedshouldinclude,attheveryminimum,absoluteemissionsincludingthedirectemissionsofoperationsandthroughoutthevaluechain.TheGHGProtocolCorporateAccountingandReportingStandard(originallypublishedin2001)isregardedastheglobalmarketstandardforcalculatinganddisclosingGHGemissionsdata.ThestandardincludesguidanceonhowtodevelopaGHGemissionsinventoryandthecalculationmethodsorganisationsshouldusetounderstandtheirdirectandindirectemissions.Inparticular,theGHGProtocoldifferentiatesbetweendirectandindirectemissionssourcesthrough“scopes”.CategorisingemissionsasScope1,2and3,organisationscanidentifythegreatestsourcesofemissionsandensurethatmultipleorganisationsdonotaccountforthesameemissionsinthesamescope(WBCSDandWRI2004).Emissionsaredefinedas:◾Scope1:Directemissionsoccurfromsourcesthatareownedorcontrolledbytheorganisation.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure53◾Scope2:Indirectemissionsfromthegenerationofpurchasedelectricityconsumedbytheorganisation.◾Scope3:OtherindirectemissionsthatarenotincludedinScope2andareaconsequenceofactivitiesthatoccuroutsidetheownershiporcontrolofthecompany(bothupstreamanddownstream).Additionally,financialinstitutionsshouldprovideScope3emissionsthatrelatetofinanc-ingactivities.Thiswillnotonlyhelporganisationsunderstandtheclimateimpactoftheirlendingandotherfinancingactivitiesandwhethertheseactivitiesarealignedtointernationalclimategoalsbutwillalsohelptoidentifytransitionrisksandopportunitiesthattheorganisationisexposedto.ThePartnershipforCarbonAccountingFinancials(PCAF)createdtheGlobalGHGAccountingandReportingStandardfortheFinancialIndustry(2020)tostandardisethecalculationapproachusedtoassessfinancedemis-sionsdata.BanksshoulduseboththeGHGProtocolCorporateAccountingandReportingStandardandthePCAFGlobalGHGAccountingandReportingStandardfortheFinancialIndustrytocollectandreporttheirScope1,2and3emissions,includingfinancedemissions.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure54Whatshouldourtargetsbe?Climate-relatedtargetsshouldbesettomeasureperformanceagainsttheorganisa-tion-specificpoliciesandstrategies.Thesetargetsshouldfocusonreducingnegativeelements(i.e.,GHGemissions),butalsoproactivetargets(i.e.,totalamountofgreenloans).Figure19:ExampleofGHGemissionsdata.Source:CTBCHoldingsSustainabilityReport(2020),pages56and60.CTBCHoldingpresentstheirGHGemissionsdataforScope1,2and3,inadditiontoinitialdataonScope3financedemissionsaccordingtothePCAFmethodology.Theyprovidethetotalfinancedemissionsdataalongsideanexplanationofwhatwasincludedintheinventory,andtheirintentionstocontinuetomonitorandsettargetsinthefuture.TheScope1,2and3(exceptfinancedemissions)dataispresentedingraphswithmultipleyearsdatadatingbackto2016.Thisdataisdisaggregatedbyscopeandpresentedwithabsoluteandintensitymetrics.Alongsidethequantitativedata,CTBCHoldingalsoprovidesanarrativethatdescribesandexplainstheresults,inadditiontodetailsaboutthemethodologyandemissionsfactorsthatwereusedinthecalculation.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure55Financialinstitutesmayconsidersettingtargetsinrelationtoclimate-relatedrisks,align-mentandfinancing(Table10).Althoughallthreemaycollectivelybepartofanorgani-sation’sclimatestrategyandoverlapinsomeelements,theyaredistinctandwillrequiredifferentactionsandmetrics.Table10:Typesofclimate-relatedtargets.TypeoftargetExampleRisktargetReducingtheamount(orpercentage)ofassetsorbusinessactivitiesthatareconsideredvulnerabletoclimate-relatedtransitionorphysicalrisks.Reducingtheclimatevalue-at-risk.AlignmenttargetReducingthewarmingpotentialofloanportfoliostoalignwiththe1.5°C/2°Cinternationalgoals(Parisalignment).Net-zeroportfolioalignment.FinancingtargetIncreasingthetotalamountoffinancingdeployedtowardclimate-relatedrisksandopportunities(i.e.,greenbondsorgreenloans),andtheproportionoftheseproductsinthewholeloanportfolio.Toensuretargetsareeffectivetheyshouldbeattachedtoanindicator,betimebound,andincludeabaseline.Oncethetargethasbeenset,theorganisationshouldcommu-nicatethiseffectivelyintheannualdisclosure,includingdemonstratingprogresseveryyear.Wheretargetsarelongterm(i.e.,2030or2050),organisationsmayalsoprovideinterimtargetstosignalprogressinappropriateintervals.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure56Howdoweobtainthedataneededtoreportmetricsandsettargets?Climate-relatedfinancialdataisacommonareawheremanyinstitutionsstruggle.Whileclimateriskanalysesdemandtraditionalfinancialdata,theyalsorequirenewformsofdatathatmayinitiallybeunfamiliartopractitioners.However,whiledatagapscertainlyexist,thereisoftensignificantdataavailableonavarietyoffactorstoenableaninstitutiontobeginsettingmeaningfultargetsonclimaterisk,alignment,andclimatefinance.Figure20:Exampleofclimate-relatedtargets.Source:MizuhoFinancialGroupTCFDReport(2020),page30.AspartoftheirTCFDdisclosure,MizuhoFinancialGrouphavesetthreetargetsrelatedtoclimate-relatedrisksandopportunitiesinlinewiththeirEnvironmentalPolicy.Thisincludesafinancingtarget,alignmenttargets(focusedoncreditforcoal-firedpowergeneration),andtargetstoreducetheirownoperationalGHGemissions.TheyarealsoexploringaligningtheirtargetswiththeScience-BasedTargetsInitiative.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure57Keyclimate-relatedfinancialdataincludesthefollowing:Table11:Climate-relatedfinancialdata(UNEPFI,2021)DatatypeDatarequiredClimatehazarddata◾Historicaldataonacuteandchronicphysicalrisks.◾Projectionsoffutureacuteandchronicphysicalrisks,includingtheirseverityandfrequency.◾Adaptivecapacitydatatodetermineclientresilienceandsensi-tivitytoclimatehazards,includingcurrentadaptationstrategiesofclients.◾Climatehazarddatabasedongeography,sectorandindustry,includingeconomiclossesfrompastclimatehazards.Datadescribingtransitionriskdrivers◾Dataontransitionriskdriversincludingpolicyimplementation,marketshifts,technologicalchangesandreputation.Emissionsdata◾Energyandcarbonmixofcounterparties.◾PublishedorestimatedGHGemissionsproducedbyportfoliosandassetsofclients.◾GHGemissiondatabyregion,sectororindustry.◾Energyefficiencydata,forexamplerealestateratingsliketheEnergyPerformanceCertificateRating.◾Dataoncarbonpricingbyjurisdiction.Climate-relatedclientdata◾Identificationofthephysicalassetsownedbyclients.◾Detailedandgranulargeographical/geo-locationaldataofassets.Alignmentandtransitiondata◾TransitionpathwayssetbyclientsinaccordancewiththeParisClimateChangeAgreement.◾Science-basedemissionreductiontargetssetbyclients.◾Climatepoliciesandpledgesofcountries.Anumberofopen-sourcedatabasesdiscussedaboveintheStrategyguidancesectionwillbeusefultofirmsinobtainingthisdata.Inaddition,themanyofthetoolprovidersmentionedinthatsamesectionalsohavedatathatcanenableinstitutionstounderstandtheirclimaterisksandopportunities.Collectingthenecessaryclimate-relateddatamayvarybasedonwherethatdataoriginates.However,structuredprocessescanimprovedatacollectionandfuturedataqualityasdiscussedintheguidancebelow.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure58GatheringdatathroughinternalsourcesandexternalpartnershipsAttempttocollectasmuchrelevantclimatedataontheclient◾Usein-housecapabilitiestodevelopinternaltoolsIncreasestakeholdercollaboration◾Collaboratewithregulators,governments,municipalitiesandotherstakeholdersDevelopindustrypartnershipstoprovidethetoolsandsupportneededtoclients◾Partnerwithtechnologyfirmstoleveragetheuseofdigitalresources◾EngagewithpeerstoidentifydatagapsandacceleratethedevelopmentofsolutionsGatheringdatafromclientsFacilitateopenandeffectivecommunicationwiththeclientaboutdatarequirements.◾Takestepstoincreasecommunication◾Facilitateeffectivecommunicationthroughworkshops,coursesandmaterials◾Opencommunicationwillbeusefulinunderstandingtheclient’scurrentprogressindisclosingdataUpdatecurrentclientengagementprocesses,suchas:◾Underwriting◾Knowyourcustomer(KYC)◾Otherduediligenceprocesses◾IntegrateclimatestresstestdatarequirementsintotheseprocessesImprovingfuturedatacollectionprocessesDevelopaquestionnairebasedonthedataneededfromtheclient◾Thequestionnaireshouldactasaguidetoensurethatnecessaryinformationiscollected◾Thequestionnairecanbeprovidedduring◾Onboardingprocess◾Annualreview◾Duediligenceprocess◾Ad-hocclimaterelateddiscussionsIntegrategeospatialdatarelatedtoclientsandtheirassets◾Canbeusedtoidentifyat-risklocations◾MayrequireupgradestoITinfrastructureVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure594.6AdditionalConsiderationsHowmuchinformationshouldbedisclosed?Disclosuresshouldbeclear,conciseandproportional.Itisimportantnottooverwhelmreportuserswithtoomuchinformation,andthereforeorganisationsshouldapplytheprincipleofmaterialitytoensurethemostpertinentinformationiseasilyaccessible.Organisationsalsoshouldconsiderhowtheirdisclosureonclimate-relatedmatterscompareswithdisclosuresonotherfinanciallymaterialissuestothecompanytoensurethatitisproportional.Someorganisationshaveattemptedtoovercometheseissuesbydisclosingthemostmaterialinformationinthemainstreamannualreport,butalsopublishadditionalTCFD/climatereportsthatcanprovidefurtherdetails.Whenthisapproachistaken,organisa-tionsshouldensurethatthetworeportsareconnected,andinformationisappropriatelycross-referenced.Itisalsoimportantthatdisclosuresarespecifictotheorganisationandtailoredtothesectorsandgeographiesinwhichitoperates.Organisationsthatprovidegenericdisclo-suresthatcanbeappliedtoanyotherorganisation,risktheinformationbeinginade-quateforfinancialdecision-making.Howcanclimate-relatedinformationbeconnectedtofinancialinformation?Oftenclimate-relatedinformationthatisdisclosedinannualreportsfocusesontheidentificationandmanagementofrisksandGHGemissionsdatabutisnotexplicitlyconnectedbacktothefinancialmetricsandaccounts.ThepurposeoftheTCFDistoconnectclimatechangetofinancialdecision-making,andthereforeitisimperativethatorganisationsprovidefinancialmetricsthatarereconciledwithfinancialaccountingstandardsandtheinformationpresentedintheorganisations’financialstatements.TheIFRSFoundationsetsstandardsforfinancialaccountingandreporting,whichhavebeenadoptedbyapproximately120reportingjurisdictions.TheseIFRSstandardscan,andshould,beusedbyorganisationstoprepareandincludeclimate-relatedmattersinfinancialstatements.CDSBhasdevelopedguidanceforaccountingprofessionaltooutlinehowsomeofthesestandardscanbeusedeffectively(CDSB2020).Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure60WhatmilestonesshouldwefollowindevelopingandwritingourTCFDreport?ItcanbehelpfultosetinternalmilestonesorcheckpointsduringtheTCFDreportingprocesstoensurethattheworkreceivesappropriatereviewandbuy-infromacrosstheorganisation.1.InitialcommitmentThefirststepintheTCFDprocessisthedecisiontowriteareport.Thisinitialcommit-mentshouldcomefromseniorstakeholderswhocanmobilizetherequisiteresourcesforthedraftingofadetailedreport.Theseseniorleadersshouldalsobeaccountableforthecontentwithinthereport.2.AssignmentofresponsibleteamsAsdiscussedpreviously,writingaTCFDreportwillrequireinputsfromacrossanorgan-isation.However,clearlydefinedrolesandresponsibilitiesinthedraftingprocesswillsupporttheproductionofatimelyandhigh-qualityreport.Membersofthesustainabilityandriskteamsshouldbeonpointforproducingthereport.Executiveattentiontothereportdevelopmentprocesscanhelpthereportwriterstoobtainthedataandinforma-tiontheymayneedfromtheircolleagues.Thoseassignedtowritethereportshouldbeclearonwhichportionsofthereporttheyareresponsibletowriteandwheresupportingdataandanalysesarelikelytocomefrom.Oncetheprimaryownersofthereporthavebeenidentified,theyshoulddevelopaworkplanforthecompletionofthereport.Thenextstepswilldiscussconsiderationsforthisworkplan.3.GatheringkeyinternalinformationManyoftheTCFD’srecommendeddisclosuresrequestinformationoninternalprocessesaroundgovernanceandriskmanagementaswellasthefirm’sstrategicplans.Reportwritersshouldlooktoaggregateallthenecessaryinternalinformationastheydraftthereport.Forthegovernancepillar,thiswillrelatetotheclimaterelevantpracticesoftheboardandseniormanagementaswellasanyaccountabilitymechanismsfortheseleaders.Forstrategy,bothfirm-widestrategicplansandthoseofmaterialbusi-nesslinesshouldbeconsidered.Conversationswithbusinessheadsshouldinformthewaysinwhichclimate-relatedrisksandopportunitiesareincorporatedintostrategicdecision-making.Riskmanagementwillconcerninternalreportingpracticesaswellaspoliciesandproceduresaroundclimateriskidentification,assessment,andmanage-ment.Formetricsandtargets,existingandproposedclimatetargetsshouldbeincluded.Formanyinstitutions,someoftheseelementsmaybeabsentatthetimethereportisbeingwritten.Inthiscase,theTCFDreportshouldindicateplansthatthefirmhastodevelopthesecapabilities.4.GatherkeyexternalinformationWhileinternalinformationwillformthebulkoftheTCFDreport(asthereportattemptstodescribeafirm’sresponsetoclimaterisksandopportunities),informationfromexternalsourcesisalsoneeded.Specifically,forscenarioanalysis,reportwritersshouldconsidercommonlyusedphysicalandtransitionscenarios.Fortransitionscenarios,theinclu-sionofa1.5°Cscenarioisincreasinglyexpectedbystakeholders.Manyofthesescenar-Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsPracticalstepstowardsdisclosure61iosarepubliclyavailableandareproducedbywell-knownscientificresearchers,whichsupportseffortstocompareresultsacrossreports.Atougherchallengemaybetheacquisitionofclientdataonclimate-relatedrisksandopportunities.PubliccompaniestypicallyreportonemissionsandmayevenhaveaTCFDreportoftheirown.Forsmallerclientsorthoselackingadequatedata,proxiesbasedonlocationandeconomicactivitycanbehelpful.Formaterialclients,directengagementisrecommendedinordertobetterunderstandtheirclimatestrategyanditsimplicationsforthefinancialinstitution.5.Conductrelevantanalyses-qualitativeandquantitativeOncethenecessarydataiscollected,bothqualitativeandquantitativeanalysesmaybeconducted.Qualitativeanalysesmayincludeheat-mappingofphysicalandtransitionrisksacrosssectorsandregions,outcomesofrecentclientengagements,andanec-dotesregardingthefirm’sclimateriskmanagementorsustainabilitypractices.Quanti-tativeanalysesmayrequiretheconstructionofnewmodels,theadaptationofexistingmodels,ortheuseofvendortools.Thesequantitativeanalysesmayincludeclimatescenarioanalysisandassociatedlossesforportfoliosunderdifferentscenarios,thefirm’sfinancedemissionsfootprint,thevolumeofclimatefinancingprovidedtospecificprojectsandindustries.6.CompleteeachrecommendedTCFDdisclosureThefourpillarsoftheTCFDandtheassociatedrecommendeddisclosuresarenaturalcheckpointsasthereportisbeingdeveloped.DisclosurescanbecomparedagainsttheTCFDguidanceandagainsttheexampledisclosuresfeaturedinthisreport.Itisimport-anttorecognisethatmanyofthedisclosuresareinterrelatedandasaresult,theymaybecompletedinparallel.Forexample,disclosuresonincorporatingclimateintostrategywillalsoconnectwiththespecificclimatetargetsthatthefirmsets.7.SubmitreporttoseniormanagementforsignoffOnceafulldraftofthereportisdeveloped,itshouldbesharedwithseniormanage-mentforsignoff.Earlierintheprocess,itcanbehelpfultosocialisethereportwithrelevantinternalstakeholderstoensuretheirunderstandingandagreementwiththekeymessages.Asthereportintendstoreflectafirm’sholisticpracticesofclimateriskmanagement,itshouldhavebuy-infromacrosstheorganisation.Returningtothegover-nancepillar,seniorleadershipshouldbeaccountableforthecontentexpressedwithinthereport,whichmeanstheymusthavesufficientfamiliaritywiththedisclosuresbeingmade.Manyfirmsmayhaveanexecutivecommitteesignoffonthereport,oradesignatedseniorofficerwhoisdirectlyresponsible.Thismirrorstheaccountabilityprocessregardingtraditionalfinancialstatements.8.PublishOnceseniorsignoffisobtained,theTCFDreportshouldbereleasedpublicly.Thefirmshouldengagewithitsmainstakeholderstosolicitfeedbackonthereportandansweranyquestionsabouttheirpractices.Thistransparencywillallowbothinternalandexter-nalstakeholderstomakethemosteffectiveuseofthereport.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsConclusionandrecommendednextstepsforVietnamesebanks625.ConclusionandrecommendednextstepsforVietnamesebanksAstheglobaluptakeoftheTCFDrecommendationsincreases,throughvoluntarydisclo-sureandemergingregulatoryrequirements,itisimportantfororganisationsthathaven’talreadystartedidentifying,assessing,managing,anddisclosinginformationaboutclimate-relatedrisksandopportunities.Thispaperprovidesusefulguidance,butorgan-isationsshouldplanforaphasedanditerativeapproachwiththeaimoffulldisclo-sureinthenearfuture.ThereareseveralelementstotheTCFDrecommendationsthatorganisationsmayfindcomplex,andthereforetheiradoptionshouldbeaccompaniedbyaclearimplementationplanwithrolesandresponsibilitiesdistributedthroughouttheorganisation.WhilsttheTCFDrecommendationsareultimatelyadisclosureframework,theyarealsodesignedtoinfluenceandstructureinternalprocessesanddecision-makingwithinorganisations.Beingabletoprovidereliable,consistent,andcomparableinformationrequiresrobustgovernanceandriskmanagementstructures,andwell-establisheddatamanagementsystems.Organisationsshouldthereforeseektoadjustexistingor,whereappropriate,createnewinternalprocessessoastobepreparedtodiscloseclimate-re-latedfinancialinformationthatisdecision-usefultoinvestorsandotherreportusers.Emergingmarketsinparticularareexposedtoanumberofbothtransitionandphysicalrisksthatjeopardisetheirabilitytocreateandmaintainvalue.WhilstitisnotedthatthereareexamplesoforganisationsintheseregionsthatarealreadyimplementingtheTCFD,furtherworkisrequiredtoensurethesemarketsareresilienttoanyfutureclimate-re-latedshocks.ThenexttwosectionscoverspecificrecommendationsforVietnam’scentralbankandforthebankingsectoroverallregardingclimateriskpractices.Theserecommendationsrepresentpotentialnextstepsinkeepingwithgloballeadersonclimateriskanddisclosure.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsConclusionandrecommendednextstepsforVietnamesebanks635.1RecommendationsfortheStateBankofVietnamasafinancialregulator5.1.1Joinclimate-relatedregulatoryinitiativesOverthepastfewyears,financialsupervisorsaroundtheworldhaveworkedtodevelopgoodpracticesregardingclimate-relatedriskmanagementanddisclosure.TheStateBankofVietnamcanbenefitfromtheexperiencesofpeerinstitutionsonthesetopicsbyjoininginternationalinitiativessuchastheNGFS.Withover100members,thecollectionofsupervisorsandcentralbankswithintheNGFShaveworkedonscenariodevelop-ment,climaterisksupervision,andovercomingclimate-relateddatachallengesamongmanyothertopics.Arecentexampleofthiscollectiveworkistheir2021ScenariosinActionreport,whichoffersdozensofexamplesofhowmemberinstitutionsareapply-ingclimatescenariostoassessclimaterisksintheirfinancialsystems(NGFS,2021).InadditiontoitreleasedtheNGFSit'sthirdvintageoftheNGFSscenarios,afurthermile-stonetoimprovingtheunderstandingoftheimpactsofclimatechange(NGFS,2022).TheabilitytodialoguewithpeerswillallowtheStateBankofVietnamtoacceleratethedevelopmentofitsclimateriskguidance.AnotherinternationalgroupseekingtoestablishsupervisorybestpracticesonclimateriskistheBankforInternationalSettlements(BIS).TheBIS’sBaselCommitteeonBank-ingSupervision(BCBS)publishedaconsultationattheendof2021onprinciplesforeffectiveclimateriskmanagementandsupervisionofclimate-relatedfinancialrisks(BIS,2021).Otherregulatoryinitiativesworkwithbothsupervisorsandsupervisees.TheClimateFinancialRiskForum(CFRF)convenedbytheFinancialConductAuthority(FCA)andPrudentialRegulatoryAuthority(PRA)intheU.K.isacollaborationbetweenthesetworegulatorsandanumberofmajorU.K.financialinstitutions(FCA,2021).TheCFRFoffersanopportunityforregulatorstogaininsightsintothechallengesthatsuperviseesarefacingregardingclimate-relatedfinancialrisksandenhanceindustryknowledgeonthisimportanttopic.5.1.2Committobuildingcapacityonclimate-relatedtopicsClimatechangeisacross-cuttingrisk,meaningthatitwillhaveimplicationsformanyoftheactivitiesthattheStateBankofVietnamundertakes.TheStateBankofVietnamshouldensurethatagrowingshareofitsstaffbuildssufficientclimate-relatedfinan-cialriskknowledgetoallowthemtoeffectivelyintegratetheseclimaterisksintotheircurrentwork.Capacity-buildingprogrammesareonewaythatsupervisorsbuildknowledgeonfastmovingclimate-relatedfinancialtopics.Theseprogrammescanbeinternalseminarswherethosemostinvolvedwithclimateriskspeakwiththeircolleagues,buttheycanalsoincludeexternaltrainingandsupport.Theobjectiveofthesetrainingsshouldbetohighlighttherelevanceofclimate-relatedfinancialrisksfordifferentfunctionsacrossthebankandprovideaprimeronmajorclimaterisks,globalregulatoryinitiatives,andriskassessmentmethodologies.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsConclusionandrecommendednextstepsforVietnamesebanks64TheStateBankofVietnamshouldalsolooktoconnectwithotherministrieswithover-sightresponsibilitiesfortheVietnameseeconomytoexchangeknowledge.Inparticu-lar,engagementwithMONREwillbeparticularlyvaluableinunderstandingthephysicalrisksthatVietnamfacesfromclimatechangeandtheadaptationmeasuresrequiredtoreducetheserisks.5.1.3DevelopaclimateroadmapTheGIZandUNEPFIprogrammeprovidedinformationonawiderangeofclimate-re-latedissues.Now,theStateBankofVietnamhastheopportunitytoconsiderhowbesttoproceedinmanagingclimate-relatedfinancialriskswithinthecountry.Acentralbankhasmanytoolsatitsdisposaltosupportfinancialstabilityandsustainabilitygoals.Aroadmapcanhelptodeterminewhenandhowtodeploythosetoolsandtocommuni-catethoseplanstofinancialindustryactors.ClimatedisclosurerequirementsinlinewiththeTCFDareoneoftheitemstoconsiderwithinaroadmap,andonethatwascoveredinthegreatestdepthduringtheGIZandUNEPFIprogramme.However,acomprehensiveclimateplancanalsoexploreindi-vidualandsystematicassessmentsofclimate-relatedfinancialrisksthroughclimatestresstesting.Thenatureofthesestresstestscanbeinformedbyexistingglobalinitia-tivesandthentailoredtoVietnam’sspecificcontext.InCanada,France,andHongKong,climatescenarioexerciseswithindustryparticipantsweredevelopedbysupervisorsaheadofmandatorystresstests.InApril2022theTransitionPlanTaskforce(TPT)waslaunchedbyHMTreasurytodevelopthegoldstandardforprivatesectorclimatetransi-tionplansapplicabletotheUK,butgloballytransferable.TheTPTpublisheditsDisclosureFrameworkandaccompanyingImplementationGuid-anceatCOP27inNovember2022.Bothdocumentsareopenforpublicconsultationuntil28thFebruary2023(TPT,2022)Asmoregovernmentsandcorporationsmakenet-zerocommitments,theStateBankofVietnammayalsobeinterestedtodevelopapositiononclimatealignment.Supervisorypoliciesonthistopiccanincluderequirementsforfirmstoannualdiscloseprogressagainstaspecificdecarbonisationtargetortoprovideadetailedtransitionplanonhowtheyintendtoreachnetzero.AtCOP26,theU.K.announcedarequirementforlistedcompaniestoproducethesetransitionplans.TheStateBankofVietnamshouldalsoconsiderthemagnitudeofadaptationandmiti-gationfinancingnecessaryforVietnamandlookforwaystocatalyzethenecessaryclimate-resilientandlow-carboninvestments.Supervisorsaroundtheworldhaveusedtaxonomiestodefineactivitiesthatcontributetoclimateandbroaderenvironmentalgoals,withtheEUtaxonomyandChina’staxonomybeingtwoofthebest-knownexam-ples.Ataxonomyorotherclassificationapproachcanbothlimitgreenwashingandencouragefinancialinstitutionstoincreasetheproportionofgreenfinancingtheyprovide.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsConclusionandrecommendednextstepsforVietnamesebanks655.1.4Setupclimate-relatedfinancialdisclosurerequirementsAninitialstepintheStateBankofVietnam’sclimateroadmapcanbetheestablishmentofclimate-relatedfinancialdisclosurerequirements.Overthepastyear,supervisorsfromKenyatoSingaporehavemandatedclimate-relatedfinancialdisclosuresfromtheirsupervisees.Dependingonthejurisdiction,theexactrequirementsandthetimingofthemandatesmaydiffer,buttheunderlyingprinciplesarenearlyalwaysrelatedtotheTCFDpillars.WiththecreationoftheInternationalSustainabilityStandardsBoard(ISSB)andtheirimpendingguidanceonglobalsustainabilitystandards,supervisorswillhaveanaddi-tionalpointofreferenceinharmonisingtheirdisclosureexpectationstoglobalpractices.BydevelopingspecificdisclosureexpectationsforVietnam’sfinancialsector,theStateBankofVietnamwillreapmultiplebenefits.First,theStateBankofVietnamwillgainabroadpictureofthefinancialsector’spreparednessforclimatechangeandalsobeabletocomparespecificfirmstoeachotherandtotheindustryoverall.Mandatoryreportingrequirementswillimprovethequalityandstandardisationofthedisclosuresmadebyfinancialinstitutions,makingthesedisclosuresmoreusefulforstakeholders.5.1.5IssueaTCFDreportTheStateBankofVietnamshouldalsolooktomakeadisclosureofitsownclimate-re-latedfinancialrisksinlinewiththeTCFDand/oritsownproposedmandatoryguidance.Inthepasttwoyears,agrowingnumberofregulatorshaveissuedclimatedisclosures,beginningwiththeBankofEngland’s2020TCFDreport(June,2022).ThepracticeofissuingaTCFDdisclosurebuildsregulatorycredibilityonclimatechangeby“walkingthetalk”andsubjectingoneselftothesamestandardsasotherfinancialactors.Further-more,theexerciseofdevelopinganddraftingaTCFDreportwilllikelyprovidetheStateBankofVietnamwithimportantinsightsaboutthenatureofclimate-relatedfinancialrisksinthecountryandtheleversithastoaddressthem.Thereportingprocesswillalsomakebankstaffmoreawareofthekeyareastoassesswithinfinancialinstitutiondisclosures.Inaddition,draftingaTCFDreportwillhelptheStateBankofVietnamtounderstandthechallengesthatfinancialinstitutionsmayexperienceontopicsofclimatedataandclimatescenarios.5.1.6Conductanassessmentofclimate-relatedsystemicrisksBeyondsimplyissuingaclimate-relatedfinancialriskdisclosure,theStateBankofViet-namcanconductanassessmentofclimate-relatedriskswithinVietnam’sfinancialsystem.Similartoastresstest,suchanassessmentcanidentifythemajortransitionandphysicalrisksthatthenation’sfinancialsectorfaces.Itcanalsoproviderelativemagnitudesoftheserisksandsuggestmitigationmeasuresinordertolessentheirpotentialimpactsandimproveresiliencyunderavarietyofclimatefutures.Multipleregulatorshaveorareintheprocessofcompletingsuchexercises.Asnotedabove,threeexamplesincludeFrance,Canada,andHongKong.Thesescenario-basedexercisesweretailoredtothespecificpolicyandphysicalrealitiesofthelocationswheretheywereundertaken.TheStateBankofVietnamcansimilarlyuselocalscenarios(oradaptglobalscenariostoVietnam)whenconductingthisassessment.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsConclusionandrecommendednextstepsforVietnamesebanks66Byinvolvingparticipantsfromthefinancialsector,theexercisesinFrance,Canada,andHongKongofferedawayforfinancialinstitutionstoimprovetheirknowledgeofclimaterisksandclimatescenarioanalysesintandemwiththeregulator.Inaddition,thefeed-backfromtheseexercisescanbeintegratedintothedevelopmentofclimatestresstests.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsConclusionandrecommendednextstepsforVietnamesebanks675.2RecommendationsforVietnam’sfinancialinstitutionsinmanagingandreportingonclimaterisksAswiththerecommendationstotheStateBankofVietnam,thefirstthreerecommenda-tionsforVietnam’sfinancialinstitutionscenteronjoiningclimate-relatedfinancialinitia-tives,buildingcapacityonclimate-relatedtopics,anddevelopingaclimateroadmap.5.2.1Joinclimate-relatedfinancialinitiativesThenumberofclimate-relatedfinancialinitiativesisgrowingrapidlyacrosstheworld.Developmentfinancialinstitutions(DFIs)aresupportingtheconveningofregionalfinan-cialinstitutionstodiscusstheircommonclimatechallenges.OrganisationslikeUNEPFIandthePrinciplesforResponsibleInvestment(PRI)offerspecificworkinggroupsforfinancialinstitutionslookingtoimprovetheirclimateriskmanagementpracticesthroughexpertconsultationsandpeerdiscussions.Vietnam’sfinancialinstitutionscanalsocometogethertocreateanationalclimatework-inggroup.Similargroupshavebeenconvenedbynationalbankingassociationsinavarietyofcountries.Adedicatedclimate-relatedfinancialworkinggroupcanfocusontheimplementationoftheTCFDrecommendationsandthedevelopmentofeffectiveandlocallyrelevantclimateriskmanagementpracticesforVietnam’sfinancialsector.Theworkinggroup’smemberscancommittoissuingaTCFDreportwithinacertaintimeperiodandthencanholdimplementationsessionsfeaturingexpertspeakerstohelpthefirmscontinuetoprogressintheirclimateriskassessment,management,anddisclosure.5.2.2Committobuildingcapacityonclimate-relatedtopicsCapacity-buildingprogrammesshouldbeginwithexecutivesandtheboardinordertoraiseawarenessoftheimportanceofclimaterisksandopportunitiestothefinancialinstitution’sfuture.Theseseniorleadersshouldhavetheknowledgeandunderstandingtosupportandchampionclimate-relatedinitiativesforthefirm.Trainingsarealsocriticalforthoseexpectedtoexecuteclimate-relatedworkatthefirm.TheseincludemembersofthesustainabilityandriskteamswhoarelikelytobewritingtheTCFDreport.TrainingsforthesegroupsshouldcoverVietnam’sclimaterisks,rele-vantclimatedataandclimatescenariosforVietnam,globalpracticesaroundclimateriskidentificationandassessment,andguidanceonwritingaTCFDreport.ThesetopicswerecoveredinmanyoftheGIZandUNEPFIsessionsoverthecourseof2021and2022.Beyondthecoreindividualsworkingonclimate,trainingshouldbeextendedtocolleaguesthroughoutthefinancialinstitution.Asexamples:businesslinecolleagueswillneedtounderstandhowclimateimpactstheirstrategyandclientengagementandauditcolleagueswillneedtoknowhowtoassessthequalityofclimate-relatedfinan-cialanalyses.Widespreadclimateawarenesswillallowfortheeffectiveintegrationofclimatepracticesacrossthefirm.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsConclusionandrecommendednextstepsforVietnamesebanks68Firmsmustalsobewillingtocommitadequateresourcestoenabletheirclimateteamstobesuccessful.Climateteamsshouldbesufficientlystaffedandshouldincludeteammemberswithclimate-specificskillsetsandexperience.Thismayrequireanexpan-sionofcurrentclimateteamsorthehiringofnewcolleagues.Necessaryresourcesalsoincludedataandtechnicaltoolsthatallowmeaningfulinsightstobegleanedfromclimateriskanalysis.5.2.3DevelopaclimateroadmapFinancialinstitutionsinVietnamshouldalsodevelopaninternalclimateroadmap.ThisroadmapshouldbereflectiveoftheirclimateambitionsoverthecomingyearsandalsoadaptedtoincorporateregulatoryrequirementsfromtheStateBankofVietnam.Acomprehensiveclimateroadmapshouldincludethreeareas:climaterisk,climatealign-ment,andclimatefinance.Goalsandtargetscanbeassociatedwitheacharea,andshouldbesupportedbyspecific,actionable,andtime-boundinitiatives.Forclimaterisk,theroadmapmayincludeplanstoissueaTCFDdisclosure,planstoconductaninternalstresstest,andplanstoreduceexposuresinat-risksectors.Forclimatealignment,theroadmapmayincludeplanstocalculatethefirm’sfinancedemissions,planstocreatespecificexclusionpoliciesforclimate-damagingactivities,andplanstoreducetheintensityofemissionswithinspecificportfolios.Forclimatefinance,theroadmapmayincludeplanstoscaleupadaptationfinancinginareasofthefootprintmostexposedtoclimatechange,planstoincreaseinvestmentsinrenewableenergy,andplanstooffergreenfinancialproductssuchasclimateorsustain-ability-linkedbonds.5.2.4Governance:DevelopinternalgovernancearoundclimateThroughoutthisreport,theimportanceofseniorleadershiponclimatehasbeendiscussed.Ensuringthattheboardandmanagementareengagedintheoversightofclimate-relatedrisksandopportunitiesisvital.Specificpoliciesshouldbedevelopedtoassignoversightresponsibilitiestoseniorleadersrelatedtotheexecutionofkeyclimateobjectives(e.g.,issuingaTCFDreport,announcingadecarbonisationtarget).Boardsshouldestablishsub-committeestooverseeclimate-relatedtopics.Ageneralclimatecommitteecanbeestablishedorsub-committeesfortopicsincludingclimaterisksandclimatealignment.Boardsmayalsobenefitfromthecreationofaclimatedash-boardtoprovidethemwithinsightsonthefirm’sprogressagainstvariousclimatemetrics.Managementshoulddevelopgovernancepoliciesinordertocodifythefirm’sresponsetoclimatechange.Thesepoliciesshouldsupportaccountabilityandoversightbyprovid-ingclearchainsofownershipforimportantclimate-relateditems.Policiesshouldalsoindicatewhichteamsareinvolvedinwhichaspectsofclimate-relatedriskandoppor-tunitymanagement.Finally,theyshouldhaveescalationproceduresandremediationactionsincaseswhereclimatepracticesarenotfunctioningoptimally(e.g.thefirmistakingonexcessiveclimaterisk,thefirmisindangerofmissingatarget).Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsConclusionandrecommendednextstepsforVietnamesebanks695.2.5Strategy:IntegrateclimateintostrategyAfirmshoulddocumenttherangeofclimate-relatedrisksandopportunitiesithasiden-tifiedoverarangeofdifferenttimehorizons.Then,thefirmshouldconductastrategicreviewwheretheserisksandopportunitiesareconsideredinthecontextofexistingfirmwidestrategyandthestrategyofmaterialbusinessunits.Astrategicupdateforthefirmoverallandformaterialbusinessunitsmayberequiredafterthisreviewprocess.Theaimofthisupdateisnottoproduceaseparate“climatestrategy”buttoensurethatclimateconsiderationsarewell-integratedintothestrategiesthatthefirmintendstopursue.Alterationstostrategymayincludethepursuitofspecificclimategoals(e.g.,greenfinancingordecarbonisation)andchangesfirm’sdesiredfoot-printacrosscertainsectorsorgeographiesamongothers.Inparallelwiththestrategicupdate,climatescenarioanalysisshouldbeconductedtoassesstheresiliencyofcurrentandproposedstrategies.Thisscenarioanalysisshouldcoverbothphysicalandtransitionrisksaswellasclimate-relatedopportunities.Likethestrategy,itshouldprovideinsightsovermultipletimehorizonsincludingshortterm,mediumterm,andlongterm.Thephysicalscenarioanalysisshouldincludescenariosthathighlightthemajorphysicalhazardspresentinthefirm’sfootprintundersignificantglobalwarming.Thetransitionscenarioanalysisshouldincludea1.5°Cornet-zeroscenariogiventheglobalconsensusontheneedtoaligntothistemperatureoutcome.Scenarioanalysismayincludebothqualitativeandquantitativemeasuresrangingfromhavingstrategy-settersdiscusstheimplicationsofthevariousscenarionarrativestohavingstatisticaltoolsassesspotentialportfoliorisksandlossesusingtheselectedscenarios.5.2.6RiskManagement:ConductanalysistosupportriskmanagementRiskmanagementpracticesshouldbeginwithaclearinventoryoftheclimate-relatedrisksfacedbythefirmoverallandinmaterialgeographiesandmaterialportfolios.Typically,aheatmappingprocesscanbehelpfulinenumeratingtheserisksandidenti-fyingareasofoperationsthatareexposedtosignificantrisks.Heatmapsshouldcoverbothphysicalhazardsandtransitionrisksandsuggestareasforfurtherriskanalysisandassessment.Riskmanagementprocessesshouldbedevelopedtoaddressthemajorrisksrevealedinriskidentificationexercises.Theseriskmanagementprocessesshouldbeclearlyassignedtospecificteamsandgivenappropriateoversight.Theestablishmentofthresholdsfornormaloperationsandrangesofconcernisnecessaryinordertodeter-minehowwellafirmiscurrentlymanagingitsclimate-relatedrisks.Similartotheguidanceongovernance,breachesofthesethresholdsshouldtriggerescalationandremediationactions(e.g.,haltsinoriginationofproductsinhigh-riskareasorcommitteereviewsofthethresholdbreach).Firmsshouldalsoconsidertherangeofmethodologiesbothqualitativeandquantitativethatcanbeusedtoeffectivelymanagerisksandensuretheyarecommunicatedinatimelyfashion.Thiscaninvolvethedevelopmentofinternaltoolsorcollaborationwiththird-partyproviderstoobtaintheriskinsightsnecessarytoeffectivelymanageclimate-relatedrisks.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsConclusionandrecommendednextstepsforVietnamesebanks70Theseriskmanagementprocessesshouldbewell-integratedintothefirm’sexistingriskframeworksandriskappetite.Inmanycases,thismayinvolveupdatingexistingframe-worksandriskappetitetomoreeffectivelyincludeclimate-relatedrisks.Strongintegra-tionofclimaterisksisevidencedbythepresenceofclimate-relatedconsiderationsinareassuchasunderwritingpolicies,borrowerratings,pricing,andcredit,market,andoperationalriskmodels.5.2.7MetricsandTargets:CommittoclimateactionusingmetricsandtargetsAsnotedinthesuggestedguidanceonstrategyandriskmanagement,firmsshouldseektoincreasinglyquantifytheclimate-relatedrisksandopportunitiestheyface.Themeasurementoftheserisksandopportunitiescanbedoneusingmetricssuchasthosetraditionallyusedtocalculatelossesandexposures.Aconsiderationofboththerelativeandabsolutemagnitudeoftheserisksandopportunitieswillhelpinternalandexternalstakeholdersgainafullerpictureintothefirm’sclimateefforts.Thedevelopmentofsomeofthesemetricsmayinvolvethecreationofnewclimate-relatedfinancialmodels,theadaptationofexistingfinancialmodels,theuseofthird-partysolutions,orsomecombinationofthethree.Firmsshouldalsoevaluateboththeiroperationalgreenhousegasemissions(Scopes1and2)andfinancedemissions(Scope3).Foreachscopeofemissions,goalsshouldbecomprehensivenessandtransparencyofmethodology.Datalimitationsmayposeachallengewhenitcomestoobtainingfinancedemissionsinformation,especiallywhenconsideringsmallormedium-sizedclients.Proxyapproachesareoftenrequiredandshouldbebasedoncommonlyusedandscience-basedemissionsassumptionsfordifferenteconomicactivities.Emissionsshouldbereportedinbothabsoluteandinten-sity-basedtermsforthefirmoverallandformajoreconomicsectorsandregionswithinthefirm’sfootprint.Agrowingnumberofgovernments,corporations,andfinancialinstitutionshavemadecommitmentstonetzeroby2050.Obtainingabaselineofoverallgreenhousegasemis-sionsisthefirststepinsettinganambitiousdecarbonisationtarget.Thesetargetsshouldbealignedwithafinancialinstitution’sbusinessstrategyandsupportedbyadetailedtransitionplan.Thetransitionplanshouldincludeinformationontheclientengagementprocesses,investments,strategicinitiatives,andinterimtargetsthatwillenablethefirmtoreachitsgoal.Firmsshouldestablishotherclimate-relatedtargetstotakeadvantageofemergentclimateopportunitiesandprovideadaptationandmitigationfinancing.Thesefinancingtargetscanconsidernewclimate-relatedproducts,specificformsofadaptationfinance,andthedevelopmentanddeploymentoflow-carbontechnologies.Inaddition,goalscanbesetonrenewablepowergeneration,avoidedemissions,andotherclimatepositivetopics.Finally,giventherelationshipbetweenclimateandnature,firmsshouldconsiderbroadernature-relatedgoalsandtargetstosupplementtheirclimateones.Nature-relatedgoalsmayfocusonbiodiversitypreservation,circularityofresourceuse,andreduc-tioninpollutionamongmanyothers.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsAdditionalregulatoryandcommercialbankcasestudiesfromtheprogramme716.AdditionalregulatoryandcommercialbankcasestudiesfromtheprogrammeThecasestudiesinthefollowingsectionaimtoprovidefurtherexamplesofgoodprac-ticesforVietnam’sfinancialinstitutions.ThefirstsubsectioncoverspracticesarounddevelopingrequiredclimateriskdisclosuresforthefinancialsectorandismostrelevantfortheStateBankofVietnam.Thesecondsub-sectionfeaturesspecificTCFDreportswhoseauthorspresentedtotheparticipatingbanksintheprogramme.Whilethesereportsdifferinstructure,eachofthemoffersinsightsintoeffectivedisclosuresfrommatureclimateriskandsustainabilityteams.6.1RegulatorycasestudiesAspartoftheprogramme,participantsheardfromregulatorsattheBankofEnglandandBanquedeFrance,importantmembersoftheNGFS.Thesesupervisorsspokeabouttheirpracticesanddiscussedtheclimatescenariosthattheyhaveincludedintheirrequirementsforsupervisees.WithUNEPFI’sguidanceparticipatingbanksalsoevaluatedtherangeofregulatorypracticesthathavebeendevelopedbasedontheTCFD,whichhasbecomeadefactoglobalsupervisorystandard(asnotedinsection1.3).Beyondsimplyexploringtheemergingregulatoryguidance,theprogrammehighlightedsomespecificexamplesofdisclosurerequirementsthatmayinformfutureregulatoryexpectationswithinVietnam.CasestudiesofleadingglobalsupervisoryexpectationsareshownbelowandprovideaguidefortheStateBankofVietnaminconsideringpeerregulatorypractices.ThesecasestudiesaredrawnfromtheworkoftheFinancialStabil-ityBoard(FSB)in2021(FinancialStabilityBoard,2021).Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsAdditionalregulatoryandcommercialbankcasestudiesfromtheprogramme72UKcasestudyOverallstrategyTheUKhasbeencloselyinvolvedwiththeTCFDsinceitwasestablishedin2015withthesupportoftheFSB,chairedatthetimebyMarkCarney,thenGovernoroftheBankofEngland.TheUKwasoneofthefirstFSBjurisdictionstopubliclyendorsetheTCFDRecommendations,andthefirstG7nationtopasslegislationrequiringreductionofnetgreenhousegasemissionsby100%relativeto1990levelsby2050.CoordinationbetweenUKauthoritiesIn2019,theUKGovernmentannouncedthattheimplementationoftheserecommenda-tionswouldbeacentralfeatureofitsGreenFinanceStrategyandconfirmedthecreationanewTaskforcetodeliverthiscommitment.ThisTaskforce,establishedbyHMTreasury,includesrepresentativesfromacrossUKgovernmentdepartmentsandfinancialregula-tors,reflectingthefactthatnoonebodyhasremitoverallorganisationsenvisagedintheGreenFinanceStrategy.TheTaskforcehastwoprimaryforums:asenior,executive-levelbodytoprovidestrategicinputandapprovalofkeymilestonesandpublications;andaworkinglevelgrouptoexchangeviewsonpolicydevelopmentandensurealignmentofapproaches.Thisdetailedpolicydiscussionhasprovenparticularlyusefulwhereorgan-isationshadoverlappingremitssuchastheFinancialConductAuthority(FCA)andtheDepartmentforBusinessEnergyandIndustrialStrategy(BEIS)bothofwhomneedtoconsiderhowlistedcompaniesshoulddisclose.ActionstowardsmandatoryTCFD-baseddisclosuresInNovember2020,theTaskforcepublishedanInterimReportandRoadmapchartingapathtowardsmandatoryTCFD-baseddisclosuresacrosstheUKeconomy.TheInterimReportdescribestheUK’sphasedapproachtodeliveringmandatoryTCFD-aligneddisclosuresby2025,withmostofthemeasurestobeintroducedby2023.CombinedwiththeRoadmap,thereportsetsaclearexpectationthatorganisationsacrosstheeconomyshouldstartpreparingnowformandatoryclimate-relateddisclosures.TheRoadmapitselfsetsoutindicativemeasurestobetakenbygovernmentandregulatorsatthesectorallevelandanindicativeimplementationpathacrosssevenorganisationtypes:listedcommercialcompanies;UK-registeredcompanies(includinglargeprivatecompanies);banksandbuildingsocieties;insurancecompanies;assetmanagers;lifeinsurersandFCA-regulatedpensionschemes;andoccupationalpensionschemes.Banks,buildingsocietiesand(lifeandnon-life)insurancecompaniesInApril2019,theBankofEngland’sPrudentialRegulatoryAuthority(PRA)publishedsupervisoryexpectationsforhowbanksandinsurersshouldenhancetheirapproachestomanagingthefinancialrisksfromclimatechange.Amongotherelementsexpecta-tionssetouthowfirmsshouldconsiderclimatechangeintheirdisclosures,encouragingfirmstoengagewiththeTCFDRecommendations.ThiswasfollowedinJuly2020byaletterfromthePRA’sCEOtofirms,whichincludedsector-widefeedbackonprogressagainstSS3/19implementationandseta31December2021deadlineforfullyembed-dingthesupervisoryexpectations.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsAdditionalregulatoryandcommercialbankcasestudiesfromtheprogramme73ThePRAisworkingtooptimisePillar3disclosuresbysupportingfirmsinbuildingtheirriskidentificationandassessmentcapabilities.TheUKgovernmentandfinancialregulatorsissuedastatementofsupportinresponsetotheIFRSFoundation,notingthatthecurrentworkonTCFDimplementationshouldrepresentastepping-stonetoawidercorporatereportingstandardthatisbeingdevel-opedbytheIFRSFoundation.TheUKconsidersthattheworktoimplementtheTCFDRecommendationsisofsignificantimportance,andthattheestablishmentofanISSBalongsidetheIASBwillpromotetheintegrationoffinancialandnon-financialreportingwithinacommonarchitecture.EUcasestudyOverallstrategyOverthepastyears,theEUhastakenmajorstepstobuildasustainablefinanceecosys-tem,whichcontributestothetransitiontowardsaclimate-neutralEurope.In2014,theEUestablishedcorporatedisclosuresonenvironmental,socialandgovernanceinfor-mation,includingclimate-relateddisclosures.InApril2021,theEuropeanCommissionproposedarevisiontotheexistingreportingrules,withtheobjectivetoensureaconsis-tentflowofsustainabilityinformationthroughthefinancialvaluechainandtootherstakeholders.ThecoreelementoftheCommission’sproposalisthedevelopmentofEuropeansustainabilityreportingstandardsin2022,buildingontheTCFDandotherexistinginitiatives.TheaimoftheEUstrategyisnotonlytoaddressclimate-relatedrisks,butalsotoallowallfinancialactorstoreliablydirectfinancialflowstowardssustainableeconomicactivities.ThecorporatedisclosureframeworkiscomplementedbysectoralprudentialPillarIIIdisclosurerequirements,whichexplicitlyincorporateESGrisks,aswellasentityandproduct-baseddisclosuresforfinancialmarketsparticipantsundertheSFDR.On29April2022,EFRAGlaunchedapublicconsultationontheDraftEUSustain-abilityReportingStandardsExposureDrafts.ThedifferentEUinitiativesallaimtoensureinacoherentwaythatcompaniesreporttheinformationthatinvestorsandotherfinancialmarketparticipantsneed.EUrulesaimatprovidingthecompletefinancialvaluechainandfurtherstakeholderswithmate-rial,consistentandreliablesustainabilityinformation.Itbuildsacoherentsetofdisclo-suresbasedoninformationbynonfinancialcorporates,whichencompassesalsothesector-specificneedsoffinancialinstitutions.AdoptionofNFRDandguidelinesOnefirstmajorsteptowardanEUsustainablefinanceecosystemwastheadoptionoftheNFRDin2014.TheNFRDestablishedcorporatedisclosuresofsustainabilityinfor-mation,includingclimate-relatedinformation.Itrequiresabout11,000largepublicinter-estentitieswithmorethan500employeestoreportsustainabilityinformationonanannualbasissince2018.Publicinterestentitiescompriselargelistedcompanies,banksandinsurers.Accordingtothe‘doublematerialityperspective’,thesecompanieshavetoreport(i)howsustainabilityissuesaffecttheirbusiness(the“outside-in”perspective)and(ii)howtheirbusinessimpactsonsocietyandtheenvironment(the“inside-out”Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsAdditionalregulatoryandcommercialbankcasestudiesfromtheprogramme74perspective).Thedoublematerialityperspectiveaimstoprovideinformationtoawidersetofstakeholdersandinvestors.Italsotakesaccountofinternationalclimateandenvi-ronmentalcommitments,forexampletheonessetintheParisagreement.GiventhattheNFRDleavescompaniesahighamountofflexibilityintheirsustainabilityreporting,theEuropeanCommissionpublishedNon-BindingGuidelinesin2017tohelpcompaniesdiscloserelevantsustainabilityinformationmoreconsistentlyandcompara-bly.Inparticular,theNFRDdoesnotrequirecompaniestouseacertainreportingstan-dardorframework,nordoesitimposedetaileddisclosurerequirements.Alsoin2017,theTCFDissueditsrecommendationsandAdditionalNon-BindingGuide-linesonclimate-relateddisclosures,publishedinJune2019,integratedtheTCFDRecommendationsintotheEUframework.TheseguidelinesshowEUcompanieshowtomeettheTCFDRecommendationswhilecomplyingwiththeNFRD.Furthermore,inNovember2020ECBBankingSupervisionformulatedexpectationstocreditinstitutionsondisclosuresofclimate-relatedandenvironmentalrisks,relyingontheNFRDandtheTCFDRecommendationstoincorporatedisclosurerequirementsintothesupervisoryframework.Italsopublishedareportoninstitutions’climate-relatedandenvironmentaldisclosuresconcludingthat,ingeneral,institutionsdidnotyetcomprehensivelydisclosetheirriskprofile.TheECBassessedthatalmostnoneoftheinstitutionsinscopemettheminimumlevelofdisclosuressetoutinthe‘ECBGuideonclimate-relatedandenviron-mentalrisks’,andintherelatedrecommendationsintheEuropeanCommission’s‘Guide-linesonnon-financialreporting:Supplementonreportingclimate-relatedinformation’,ortheTCFDRecommendations.InNovember2022,theECBhasidentifiedasetofgoodpracticesoriginatingfromarangeofinstitutionsacrossvariousbusinessmodelsandsizestomeetthesupervisoryexpectationssetoutintheGuide(ECB,2022).AlignmentwithTCFDrecommendationsandinternationalinitiativesTheCSRDproposalintegratesallthekeyconceptsoftheTCFDRecommendationsandspecifiesthatEUstandardswilltakeaccountofexistinginternationalinitiatives.TheEUsustainabilityreportingstandardswouldbuildonandcontributetostandardisationinitiativesatthegloballevel.Thisrequiresconstructivetwo-waycooperationandsharingofideasbetweentheEU(especiallyEFRAG)andrelevantinternationalinstitutions.TheEUsupportsinitiativesbytheG20,theG7,theFSBandotherstoencouragethedevel-opmentofabaselineofglobalsustainabilityreportingstandardsbuildingontherecom-mendationsoftheTCFDandotherexistingframeworksandstandards.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsAdditionalregulatoryandcommercialbankcasestudiesfromtheprogramme75JapancasestudyOverallstrategyJapanannouncedatransitiontoacarbon-neutraleconomyby2050inOctober2020,followedbyasubsequentcommitmentinApril2021toreachaninterimtargetof46%reductionofGHGemissionsby2030comparedto2013.TheJFSAviewsitsmissionastoprotectnationalwelfarebyenablingsustainablegrowthoftheeconomythroughsafeguardingcriticalfunctionsofthefinancialsystem.TheJFSAhaspublisheditsstrategyfordevelopingwell-functioningfinancialmarketstofinanceSustainableDevelopmentGoals(SDGs),onthebasisthataddressingenviron-mentalandsocietalnegativeexternalitiesthroughpromotingSDGsinfinancewillservetheJFSA’sultimatemandate.Inaddition,theJFSAsetoutitsplanforimplementingitsstrategyonSustainableFinanceinitsannualpolicystrategyandpriorities.CoordinationbetweenJapaneseauthoritiesClimatechangeandESGarerelevanttoawiderangeofstakeholdersfrombothpublicandprivatesectors,andithasbeennecessaryfortheprivatesectorandrelevantminis-triesandagenciestoworktogether.TheJFSAsupportsindustry-ledinitiativesandcoor-dinateswiththeMinistryofEconomy,TradeandIndustry(METI)whoareresponsibleforindustrialpolicyandtheMinistryoftheEnvironment(MOE)whoareresponsibleforenvironmentalpolicy,whenimplementingpoliciesandtoolsregardingclimatechangeandESG.AlignmentwithTCFDRecommendationsNotably,theJFSA,togetherwithMETIandMOE,supportedthefoundationoftheTCFDConsortiumofJapaninMay2019,aplatformtofacilitatespontaneouseffortsbythecorporateandfinancialsectorstoimproveclimate-relateddisclosuresalignedwiththerecommendationsoftheTCFD.TheConsortiumalsopublishedsupplementalguid-anceonTCFDRecommendations,whichillustrateshowtopublishandhowtoreadtheclimate-relateddisclosurebasedonTCFDframeworkforcorporatesandinves-tors,respectively.In2020,therevisedTCFDGuidance(“TCFDGuidance2.0”)expandssector-specificguidanceincludingbanking,lifeinsuranceandnon-lifeinsurancesectors.Thesedevelopmentspromotedmoreclarityandtransparencyforthedisclosure.Astheseinitiativeshavebeenwellreceived,morethan300Japaneseenterprises,espe-ciallymostoflargeenterprises,arenowsupportingtheTCFD.Thenumberisthelargestintheworld.Furtheractionstostrengthendisclosures:towardsanexpandedscopeandmandatoryTCFD-baseddisclosuresToachieveJapan’sGHGemissionstargets,theJFSAisexploringwaystograduallyexpandthescopeofTCFD-baseddisclosurestoSMEs,includingbyencouragingfinan-cialinstitutionstoengagewithSMEs.TheJFSAhashelddiscussionswiththeExpertPanelonSustainableFinance(EPSF),composedofsustainabilityexpertsandpracti-Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsAdditionalregulatoryandcommercialbankcasestudiesfromtheprogramme76tionersfromthefinancialandcorporatesectors,onwaystoenhanceclimate-relateddisclosuresbybothfinancialandnonfinancialcorporates.TheEPSFplanstopublishareportdetailingpolicyrecommendationsfortheJFSAbyearlysummerthisyear.Inparallel,theJFSAhastakenfurtheractionstointroducemandatoryTCFD–baseddisclosuresona‘complyorexplain’basis.InApril2021,theJFSA,alongwithTokyoStockExchange(TSE),publishedthedraftrevisionofJapan’sCorporateGovernanceCoderequiringcompanieslistedonthe‘PrimeMarket’todiscloseTCFD-basedinfor-mationoncomplyorexplainbasis.TherevisedcodewillbefinalizedinJuneafterthepublicconsultation.SincethecompanieslistedinthePrimeMarketareestimatedtobemorethan90%oflistedcompaniesinJapanonmarketcapitalizationbasis,thecodewillrequiremandatoryTCFDdisclosuretoalmostallofmajorenterprisesinJapan.6.2CommercialbankcasestudiesAspartoftheprogramme,representativesfromthreeleadinginternationalcommer-cialbanks(Barclays,StandardChartered,andNationalAustraliaBank)presentedtotheparticipantsinaworkshop.EachofthepresentinginstitutionshadbeeninvolvedinatleastonephaseofUNEPFI’sTCFDprogrammeandhasissuedmultipleTCFDreports.TheworkshopfeaturedanoverviewoftheircurrentTCFDreports,thehistoryanddevel-opmentoftheirclimateriskdisclosures,andguidanceongettingstartedinmakingafirstTCFDdisclosure.Vietnameseparticipantswerealsoabletoaskquestionsofthepresentersabouttheirinstitutionalpracticesandeachofthereportsdiscussed.Thecasestudiesfromthepresentedreportsaspiretogivereadersanoverviewofthekeyelementsofthereports,whilealsoprovidingexplanationsintowhatmakesthereporteffective.Readersinterestedinobtainingfurtherguidancefromthereportsareencouragedtofreelydownloadthefullversionsandconsultthemdirectly.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsAdditionalregulatoryandcommercialbankcasestudiesfromtheprogramme77BarclayscasestudyFullreport(BarclaysPLC,2020)OverviewBarclaysTCFDreportisdividedintosub-sectionsbasedontheTCFDdisclosurepillars.ThisstructureallowsforareadertounderstandhowBarclaysreportsoneachofthe11TCFDdisclosuresandtheprogressmadeoneachoneofthem.Intheexecutivesummary,anoverviewoftheprogressagainsteachpillarisclearlystatedthatisexpandeduponwithintherelevantsub-sections.Figure22:Barclaysoverviewof2020progressandenhancementsReporthighlightsFigure23:BarclaysclimateriskgovernancestructureVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsAdditionalregulatoryandcommercialbankcasestudiesfromtheprogramme78Figure24:BarclaysclimatedashboardVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsAdditionalregulatoryandcommercialbankcasestudiesfromtheprogramme79StandardChartered(SC)casestudyFullreport(StandardCharteredPLC,2021)OverviewReporthighlightsFigure25:SCGovernanceprogressandfutureprioritiesVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsAdditionalregulatoryandcommercialbankcasestudiesfromtheprogramme80Figure26:SCStrategyprogressandfutureprioritiesVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsAdditionalregulatoryandcommercialbankcasestudiesfromtheprogramme81Figure27:SCRiskManagementprogressandfutureprioritiesVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsAdditionalregulatoryandcommercialbankcasestudiesfromtheprogramme82Figure28:SCMetricsandTargetsprogressandfutureprioritiesVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsAdditionalregulatoryandcommercialbankcasestudiesfromtheprogramme83NationalAustraliaBank(NAB)casestudyFullreport(NationalAustraliaBank,2021)OverviewReporthighlightsBuildingclimate-relatedcapabilityTosupportbetterunderstandingandimplementationofclimateriskmanagementandidentificationandexecutionofclimate-relatedopportunities,theGrouphasdevelopedandrolledoutaseriesofclimate-relatedtrainingopportunitiesforcolleagues.In2021,theBoardincorporatedtwoclimatechangesessionsintoitsdevelopmentagenda.Sessiononecovered:(1)bestpracticeclimateriskmanagementinbanking;and(2)thechangingregulatoryandsupervisoryresponsetoclimatechangerisk.Sessiontwocovered:(1)evolvinginternationalpracticebypeerbanksinimplementingclimatecommitmentsandtherecommendationsoftheTFCD;(2)keyfindingsfromIEA’sNetZeroby2050:ARoadmapfortheGlobalEnergySectorReport;(3)climateandenviron-ment-relatedlitigationrisks;and(4)theGroup’sCorporateandInstitutionalBank’s‘BankforTransition’initiativeandtheGroup’sProjectCarbonpartnership.TheGroup’s2021annualRiskAwarenesstrainingincludedarefreshedclimateriskmoduletohelpcolleaguesunderstand:◾Highlightsfromthelatestclimatescience.◾ThegoalsoftheParisAgreement.◾ThekeyelementsoftheTCFD’sframeworkformanagingclimaterisk.◾ActionsbeingtakenbytheGrouptoaddressclimatechange.Thetrainingalsoprovidedexamplesofclimate-relatedphysicalandtransitionriskstohelpcolleaguesunderstandtheimpactsofclimatechangeonourbusiness,customersandthecommunitiesinwhichtheGroupoperates.Additionally,in2021,theGroupengagedMelbourneBusinessSchool(MBS)tohelpdevelopanddelivertargetedclimatetrainingforcolleaguessupportingthelow-carbontransitionplansoftheGroup’sbiggestgreenhouse-gasemittingcustomers.Thetrainingisexpectedtohelpbankerstoidentifyclimate-relatedrisksandunderstandtransitionplanningsotheycanbetterworkwithandsupportcustomers.During2021,75relation-shipmanagementbankerscompletedorcommencedthistraining.FollowingitsreleaseinMay2021,theGroupalsoarrangedforaspecificsessiontobeconductedbytheInternationalEnergyAgency(IEA)withtheGroup’sExecutiveLead-ershipTeamtodiscusstheIEA’sNetZeroby2050:ARoadmapfortheGlobalEnergySectorReport.Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsAdditionalregulatoryandcommercialbankcasestudiesfromtheprogramme84Phasedreviewofcarbonintensive,climatesensitiveandlow-carbonsectorsTheGroup’sphasedreviewofcarbonintensive,climatesensitiveandlow-carbonsectorscommencedin2017andisongoing.Thesereviewsconsiderarangeoffactorsincluding:(i)variousclimatechangescenariosforbothtransitionandphysicalrisk;(ii)customerstrategiesandplansandtheiralignmenttotheParisAgreementtemperaturegoals;(iii)industrytrends;and(iv)trendsinGroupexposurestothesesectors.Todate,thisreviewprocesshasledtoimplementationofthefollowingESG-relatedcreditpolicyandrisksettings.TheGroupwillnotfinance:◾Newthermalcoalminingprojectsornew-to-bankthermalcoalminingcustomers.◾Oil/tarsandsextractionprojects.◾OilandgasprojectswithinorimpactingtheArcticNationalWildlifeRefugeareaandanysimilarAntarcticRefuge.◾New,ormaterialexpansionsof,coal-firedpowergenerationfacilities.EmissionsreportingFigure29:NABKeyGHGemissionsandenergyuse2021ListofannualreportsreferencedinthisreportANZ(2020).Climate-RelatedFinancialDisclosure.Availablefrom:anz.com.au/content/dam/anzcom/shareholder/ANZ-2020-Climate-related-Financial-Disclosures.pdfBankofAmerica(2020).ResponsibleGrowthandaLow-CarbonEconomy:BankofAmer-ica’sTaskForceonClimate-relatedFinancialDisclosures(TCFD)Report.Availablefrom:about.bankofamerica.com/assets/pdf/task-force-climate-financial-disclosures-report.pdfBankofEngland(2020).TheBankofEngland’sClimate-RelatedFinancialDisclosure2020.Availablefrom:bankofengland.co.uk/-/media/boe/files/annual-report/2020/climate-re-lated-financial-disclosure-report-2019-20.pdfBarclaysPLC(2020).MakingaDifference:BarclaysPLCClimate-relatedFinancialDisclosures2020.Availablefrom:home.barclays/content/dam/home-barclays/docu-ments/investor-relations/reports-and-events/annual-reports/2020/Barclays-TCFD-Re-port-2020.pdfCTBCFinancialHolding(2020).SustainabilityReport.Availablefrom:ctbcholding.com/content/dam/twhoo/file/csr/en/report/2020CSR.pdfHSBCHoldingsPLC(2020).TaskForceonClimate-relatedFinancialDisclosures(‘TCFD’)Update2020.Availablefrom:hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centreNationalAustraliaBank(2021).NationalAustraliaBankAnnualFinancialReport2021.Availablefrom:nab.com.au/content/dam/nab/documents/reports/corporate/2021-an-nual-financial-report.pdfSociétéGénérale(2020).ClimateDisclosure:SocieteGenerale’sclimate-relatedreport-ingfollowingtheTCFDandNFRDguidelines.Availablefrom:societegenerale.com/sites/default/files/documents/2020-12/societe-generale-climate-disclosure-report.pdfStandardCharteredPLC(2021).StandardCharteredPLCClimate-relatedFinancialDisclosuresReport2021.Availablefrom:av.sc.com/corp-en/content/docs/tcfd-cli-mate-change-disclosure.pdfUBSGroupAB(2020).GroupAnnualReport.Availablefrom:ubs.com/global/en/inves-tor-relations.htmlVietnam’sClimateRisksandBestPracticesforTCFDDisclosure85ContentsListofannualreportsreferencedinthisreportVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsReferences86ReferencesACPR(2021).Climateriskanalysisandsupervision.Availablefrom:acpr.banque-france.fr/en/liste-chronologique/climate-risk-analysis-and-supervisionBancoCentralDoBrasil(2021).BCBPublicConsultationNo.86/2021—Regulationonthedisclosureofsocial,environmental,andclimate-relatedrisksbyfinancialinstitutions.Availablefrom:bcb.gov.br/en/pressdetail/2390/notaBankofEngland(2021).OurResponsetoClimateChange.Availablefrom:bankofen-gland.co.uk/climate-changeBankofEngland(2022).TheBankofEngland'sclimate-relatedfinancialdisclosure2022.Availablefrom:bankofengland.co.uk/prudential-regulation/publication/2022/june/the-bank-of-englands-climate-related-financial-disclosure-2022#:~:text=The%20Bank%20published%20its%20climate,its%20policy%20functions%20and%20operations.BaselCommitteeonBankingSupervision(2021).Climate-relatedriskdriversandtheirtransmissionchannels.Availablefrom:bis.org/bcbs/publ/d517.pdfBaselCommitteeonBankingSupervision(2021).Principlesfortheeffectivemanage-mentandsupervisionofclimate-relatedfinancialrisks.Availablefrom:bis.org/bcbs/publ/d530.pdfClimateActionTracker(2021).Vietnam’sTargets.Availablefrom:climateactiontracker.org/countries/vietnam/targets/ClimateActionTracker(2022).CATnetzerotargetevaluations.Availablefrom:climateactiontracker.org/global/cat-net-zero-target-evaluations/ClimateDisclosureStandardsBoard(2019a).CDSBFramework.Availablefrom:cdsb.net/sites/default/files/cdsb_framework_2019_v2.2.pdfClimateDisclosureStandardsBoardandSustainabilityAccountingStandardsBoard(2019).TCFDImplementationGuide.Availablefrom:cdsb.net/sites/default/files/sasb_cdsb-tcfd-implementation-guide-a4-size-cdsb.pdfClimateDisclosureStandardsBoard(2020).AccountingforClimate.Availablefrom:cdsb.net/climateaccountingClimateLinks(2017).ClimateChangeRiskProfile:Vietnam.Availablefrom:climatelinks.org/sites/default/files/asset/document/2017_USAID_Vietnam%20climate%20risk%20profile.pdfCommonwealthClimateLawInitiative(2018).Theclimateriskreportingjourney:Acorpo-rategovernanceprimer.Availablefrom:ccli.ouce.ox.ac.uk/wp-content/uploads/2018/11/CCLI-Climate-Risk-Reporting-Journey-vFINAL.pdfEFRAG(2022).AbouttheDraftEuropeanSustainabilityReportingStandards.Availablefrom:efrag.org/lab3?AspxAutoDetectCookieSupport=1#subtitle1Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsReferences87EIA(EnergyInformationAgency)(2020).Coal,nuclear,andrenewablesexpectedtoboostVietnam’selectricitycapacity.Availablefrom:eia.gov/todayinenergy/detail.php?id=22332EuropeanCentralBank(2020).Guideonclimate-relatedandenvironmentalrisks:Supervisoryexpectationsrelatingtoriskmanagementanddisclosure.Availablefrom:bankingsupervision.europa.eu/ecb/pub/pdf/ssm.202011finalguideonclimate-relatedan-denvironmentalrisks~58213f6564.en.pdfEuropeanCentralBank(2022).Goodpracticesfrclimate-relatedandenvironmentalriskmanagement.Overviewfromthe2022thematicreview.Availablefrom:banking-supervision.europa.eu/ecb/pub/pdf/ssm.thematicreviewcercompendiumgoodpractic-es112022~b474fb8ed0.en.pdfFCA(FinancialConductAuthority)(2021).TheClimateFinancialRiskForum(CFRF).Availablefrom:fca.org.uk/transparency/climate-financial-risk-forumFinancialStabilityBoard(2021).ReportonPromotingClimate-RelatedDisclosures.Avail-ablefrom:fsb.org/wp-content/uploads/P070721-4.pdfG20(2021)July2021Communique.Availablefrom:g20.utoronto.ca/2021/210710-fi-nance.htmlIASB(2021)IFRS®PracticeStatementExposureDraftED/2021/6:ManagementCommentary.Availablefrom:ifrs.org/content/dam/ifrs/project/management-commen-tary/ed-2021-6-management-commentary.pdfInternationalEnergyAgency(2021).Financingcleanenergytransitionsinemerginganddevelopingeconomies.Availablefrom:iea.org/reports/financing-clean-energy-transi-tions-in-emerging-and-developing-economiesIFRSFoundation(2021a).IFRSFoundationannouncesInternationalSustainabilityStan-dardsBoard,consolidationwithCDSBandVRF,andpublicationofprototypedisclosurerequirements.Availablefrom:ifrs.org/news-and-events/news/2021/11/ifrs-founda-tion-announces-issb-consolidation-with-cdsb-vrf-publication-of-prototypes/IFRSFoundation(2021b).TechnicalReadinessWorkingGroupResources.Availablefrom:ifrs.org/groups/technical-readiness-working-group/#resourcesIFRS(2022).ISSBdeliversproposalsthatcreatecomprehensiveglobalbaselineofsustainabilitydisclosures.Availablefrom:ifrs.org/news-and-events/news/2022/03/issb-delivers-proposals-that-create-comprehensive-global-baseline-of-sustainability-dis-closures/InternationalCorporateGovernanceNetwork(2020).ICGNViewpoint:TheBoardofDirectors&ClimateChange.Availablefrom:icgn.org/sites/default/files/ICGN%20View-point%20Board%20of%20Directors%20and%20Climate%20Change_0.pdfISEAS(2021).TheSoutheastAsiaClimateOutlook:2021SurveyReport.Availablefrom:iseas.edu.sg/wp-content/uploads/2021/09/Southeast-Asia-Climate-Outlook-2021-Sur-vey-Report.pdfMatthewsetal.(2017).ProceedingsoftheNationalAcademyofSciences.Communi-catingthedeadlyconsequencesofglobalwarmingforhumanheatstress.Availablefrom:pnas.org/content/114/15/3861Vietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsReferences88MONRE(2021).MinistryofNaturalResourcesandEnvironmentoftheSocialistRepublicofVietnam:ClimateChange.Availablefrom:monre.gov.vn/English/Pages/Home.aspxMONRE&AFD(2021).ClimateChangeinVietNam:ImpactsandAdaptation.Availablefrom:afd.fr/en/ressources/gemmes-vietnam-climate-change-impacts-and-adaptationNetworkforGreeningtheFinancialSystem(2020).NGFSClimateScenariosforcentralbanksandsupervisors.Availablefrom:ngfs.net/sites/default/files/medias/docu-ments/820184_ngfs_scenarios_final_version_v6.pdfNetworkforGreeningtheFinancialSystem(2021).ScenariosinAction.Availablefrom:ngfs.net/sites/default/files/medias/documents/scenarios-in-action-a-progress-re-port-on-global-supervisory-and-central-bank-climate-scenario-exercises.pdfNetworkforGreeningtheFinancialSystem(2021).ScenariosPortal.Availablefrom:ngfs.net/ngfs-scenarios-portal/NetworkforGreeningtheFinancialSystem(2022).NGFSScenariosforcentralbanksandsupervisors.Availablefrom:ngfs.net/sites/default/files/medias/documents/ngfs_climate_scenarios_for_central_banks_and_supervisors_.pdf.pdfNeumannetal.(2015).EnvironmentalScience.RisksofCoastalStormSurgeandtheEffectofSeaLevelRiseintheRedRiverDelta,Vietnam.Availablefrom:semantic-scholar.org/paper/Risks-of-Coastal-Storm-Surge-and-the-Effect-of-Sea-Neumann-Lud-wig/58b1e8806241e0f16b032ec73ba6e7a7bf8d608bPCAF(2020).TheGlobalGHGAccountingandReportingStandardfortheFinancialIndus-try.Availablefrom:carbonaccountingfinancials.com/files/downloads/PCAF-Global-GHG-Standard.pdfTaskForceonClimate-relatedFinancialDisclosures(2017).RecommendationsoftheTaskForceonClimate-relatedFinancialDisclosures.Availablefrom:assets.bbhub.io/company/sites/60/2021/10/FINAL-2017-TCFD-Report.pdfTaskForceonClimate-relatedFinancialDisclosures(2020).GuidanceonRiskManagementIntegrationandDisclosure.Availablefrom:assets.bbhub.io/company/sites/60/2020/09/2020-TCFD_Guidance-Risk-Management-Integration-and-Disclosure.pdfTaskForceonClimate-relatedFinancialDisclosures(2021a).TCFDSupporters.Availablefrom:fsb-tcfd.org/supporters/TaskForceonClimate-relatedFinancialDisclosures(2021b).2021StatusReport.Avail-ablefrom:assets.bbhub.io/company/sites/60/2021/07/2021-TCFD-Status_Report.pdfTaskForceonClimate-relatedFinancialDisclosures(2021c).ImplementingtheRecom-mendationsoftheTaskForceonClimate-relatedFinancialDisclosures(Updated).Availablefrom:assets.bbhub.io/company/sites/60/2021/07/2021-TCFD-Implement-ing_Guidance.pdfTaskForceonClimate-relatedFinancialDisclosures(2021d).GuidanceonMetrics,Targets,andTransitionPlans.Availablefrom:assets.bbhub.io/company/sites/60/2021/07/2021-Metrics_Targets_Guidance-1.pdfVietnam’sClimateRisksandBestPracticesforTCFDDisclosureContentsReferences89TaskForceonClimate-relatedFinancialDisclosures(2022).2022StatusReport.Avail-ablefrom:assets.bbhub.io/company/sites/60/2022/10/2022-TCFD-Status-Report.pdfTheTransitionPlanTaskforce(2022).TheTransitionPlanTaskforceSummaryrecom-mendations.Availablefrom:transitiontaskforce.net/wp-content/uploads/2022/11/TPT-Summary-Recommendationst.pdfUNEPFinanceInitiative(2018a).ExtendingourHorizons:AssessingCreditRiskandOpportunitiesinaChangingClimate.Availablefrom:unepfi.org/news/themes/climate-change/extending-our-horizons/UNEPFinanceInitiative(2018b).NavigatingaNewClimate:AssessingCreditRiskandOpportunitiesinaChangingClimate.Availablefrom:unepfi.org/publications/banking-publications/navigating-a-new-climate-assessing-credit-risk-and-opportuni-ty-in-a-changing-climate/UNEPFinanceInitiative(2020).ChartingaNewClimate:State-of-the-arttoolsanddataforbankstoassesscreditrisksandopportunitiesfromphysicalclimatechangeimpacts.Availablefrom:unepfi.org/publications/banking-publications/charting-a-new-climate/UNEPFinanceInitiative(2021a).TheClimateRiskLandscape:MappingClimate-relatedFinancialRiskAssessmentMethodologies.Availablefrom:unepfi.org/publications/climate-change-publications/tcfd-publications/the-climate-risk-landscape/UNEPFinanceInitiative(2021b).PathwaystoParis:APracticalGuidetoClimateTransi-tionScenariosforFinancialProfessionals.Availablefrom:unepfi.org/publications/bank-ing-publications/pathways-to-paris/UNEPFinanceInitiative(2021c).DecarbonisationandDisruption:UnderstandingtheFinancialRisksofaDisorderlyTransitionusingClimateScenarios.Availablefrom:unepfi.org/publications/climate-change-publications/tcfd-publications/decarbonisa-tion-and-disruption/UNEPFinanceInitiative(2021d).GoodPracticeGuidetoClimateStressTesting.Availablefrom:unepfi.org/publications/good-practice-guide-to-climate-stress-testing/WorldBank(2021).ClimateRiskCountryProfile:Vietnam.Availablefrom:climateknowl-edgeportal.worldbank.org/sites/default/files/2021-04/15077-Vietnam%20Country%20Profile-WEB.pdfWorldBusinessCouncilforSustainableDevelopmentandWorldResourcesInstitute(2004).TheGreenhouseGasProtocol:ACorporateAccountingandReportingStandard.Availablefrom:ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdfWorldBusinessCouncilforSustainableDevelopmentandClimateDisclosureStandardsBoard(2018).InsightsfromtheReportingExchange:National,regionalandinternationaldevelopments.Availablefrom:docs.wbcsd.org/2018/05/National_regional_and%20_international_developments.pdfWorldBusinessCouncilforSustainableDevelopment(2019).Modernizinggovernance:ESGchallengesandrecommendationsforcorporatedirectors.Availablefrom:docs.wbcsd.org/2020/01/WBCSD-Modernizing_governance-key_recommendations-for_boards_to_ensure_business_resilience.pdf90WorldEconomicForum(2018).HowtoSetUpEffectiveClimateGovernanceonCorpo-rateBoards:Guidingprinciplesandquestions.Availablefrom:weforum.org/docs/WEF_Creating_effective_climate_governance_on_corporate_boards.pdf

1、当您付费下载文档后，您只拥有了使用权限，并不意味着购买了版权，文档只能用于自身使用，不得用于其他商业用途（如 [转卖]进行直接盈利或[编辑后售卖]进行间接盈利）。
2、本站所有内容均由合作方或网友上传，本站不对文档的完整性、权威性及其观点立场正确性做任何保证或承诺！文档内容仅供研究参考，付费前请自行鉴别。
3、如文档内容存在违规，或者侵犯商业秘密、侵犯著作权等，请点击“违规举报”。

碎片内容

碳中和的最新文档