project

Photo: World Meteorological Organization on Flickr

Climate risk governance

Overview

The transition to more sustainable economic activity requires a capital re-allocation of trillions of dollars. To make that happen, businesses and investors must account for climate risk and outcomes in their governance and decision-making.

Our work

Climate risks, both physical risk and the risks of transition to a sustainable economy, are increasingly important. Accounting for these risks – and opportunities – is critical: costing risks affects capital allocation which in turn enables (or fails to enable) the economic change needed to facilitate the net-zero transition. Legal and non-legal strategies to account for and manage climate risk are at the forefront of recent policy efforts, such as the Task Force on Climate-related Financial Disclosures (TCFD), and climate litigation, for example the case against the REST pension fund in Australia but there is scope for more effective action.

What's next?

Our work on climate risk covers a number of interrelated perspectives. We will continue to:

  • Suggest reforms to the governance of public companies in light of climate risk management, for example changes to compensation practices and securities issuance, as well as a re-interpretation of fiduciary duties
  • Study the role of different types of asset managers in advancing green targets.

We are also working to advance the role of climate risk in financial regulatory reform, for example climate risk capital surcharges and green Quantitative Easing (QE), as well as sovereign climate risk. On all these topics, we actively engage and support stakeholders in government, at central banks, and in the private sector.

What we've achieved

  • Our work informed the development of and changes to country-level legislation through the greening of the financial sector and its regulation.
  • We have engaged with multiple pension funds and other asset managers to introduce green targets in their investment mandates.
  • We are founding partners of the new UK Centre for Greening Finance & Investment working at the intersection of law and finance to green the financial system.
  • We helped launch the Oxford Sustainable Finance Student Society which gives students at Oxford a platform to work together on sustainable finance, law, and policy.