As the requirements for financial reporting evolve, businesses need localised data to assess climate-related risks to their operations, assets, and supply chains. However, the uncertainty surrounding future climate conditions presents significant challenges in delivering this essential information with accuracy and clarity.
Dr Fiedler’s latest paper, Storylines: A Science-Based Method for Assessing and Measuring Future Physical Climate-Related Financial Risks, directly addresses these challenges by bridging the gap between climate science, accounting, and finance. This approach not only helps businesses identify potential risks but also provides a framework for making informed decisions in an increasingly complex regulatory environment.
“Over the last decade, rapid changes in the global regulatory environment mean many organisations will now be required to identify, measure, and report on the financial risks they face from a warming climate.”
“This brings the need to bridge the gaps between science and finance to the front and centre of accounting work,” says Dr Fiedler.
Understanding and projecting future climate conditions is crucial for businesses, yet the complexities involved make it a daunting task. Dr Fiedler emphasises the importance of grasping what our future climate will look like, noting the significant challenges that come with such an endeavour.
“It is almost impossible to overstate the importance of understanding what our future climate will look like. At the same time, the challenges that arise when we try to do so are many,” she explains.
“Every day we are told about record-breaking temperatures and other types of climate extremes such as bushfires and flooding that are increasingly impacting human lives and livelihoods. But without the information we need to minimise the effects on individuals, communities, and organisations, and wider society, planning becomes really problematic.”
Storylines, a concept rooted in climate science, offer a solution by describing uncertain physical climate futures through expert judgment and evidence. These narratives combine climate model projections with other relevant data to create plausible and actionable scenarios that businesses can use to prepare for the future.
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As climate risks gain recognition as significant financial threats, countries like Australia are moving towards mandatory climate risk reporting. Dr Fiedler’s research underscores the limitations of current communication methods and advocates for using storylines as a more effective approach for organisations. This method offers a comprehensive view of potential climate-related risks, making it easier for businesses to understand and act on the information provided.
“It does this in three ways,” Dr Fiedler explains.
“First, by making the need for multiple lines of evidence explicit, as there is no one source of truth where future complex dynamic systems are concerned.”
“Second, by calling on the need for multiple scientific, financial, engineering, operational, and HR experts, etc., to come together in a room, to a) evaluate these different lines of evidence, b) form a judgement as to what the most likely range of possible futures looks like, and c) consider what this means for specific assets, operations, supply chains, and communities.”
“And third, in doing so, by producing information that is both underpinned by science but also presented in a way that can really help with decision-making. The storyline approach facilitates these conversations by promoting comprehensive and multidisciplinary dialogue.”
Dr Fiedler’s work represents a pivotal step towards integrating science, accounting, and finance.
“It’s all about translation, translation, translation—how to bring the worlds of science, accounting, and finance together.”
“It’s a super interesting and dynamic space to work in, and it’s really rewarding, as I believe I am actually helping organisations understand why the climate does and should matter to them,” she concludes.
Adrianne Saplagio is a Content Producer at Comms Room, where she combines her passion for storytelling with her expertise in multimedia content creation. With a keen eye for detail and a knack for engaging audiences, Adrianne has been instrumental in crafting compelling narratives that resonate across various digital platforms.
