Carbon Pricing: Discover Your Blind Spots on Risk and Opportunity

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Carbon pricing risk from a growing array of new policies and taxes
spurred by the Paris Agreement could lead to significant losses on a
company’s financial statement. Carbon pricing risk could vary substantially among companies operating in the same business sectors. The financial risk from carbon pricing schemes depends on a company’s carbon efficiency, location of operations, business model, and the market conditions of the sector.

Company business models and broader market conditions will also
dictate whether companies are able to absorb the increased costs
or pass them on to their customers. At present, many companies measure their carbon footprint, which is an essential first step in understanding carbon efficiency of past operations, but it has a blind spot in regard to future carbon pricing risk exposure. Because a significant share of carbon pricing risk could come from supply chain activities and energy-intensive products, it is essential for companies to account for carbon risk beyond their direct
operations.

Meaningful data disclosure by companies on future carbon risk, as
recommended by the Task Force on Climate-Related Financial
Disclosures, will help inform the decision making of investors and
accelerate mainstream green finance.

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