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Princeton Strategy Group
Princeton Strategy Group
ESG Frameworks, Climate Risk Modeling, Model Risk Management, AI/ML Model Validation, Risk, Finance, OP Risk and AML/Fraud Model validation.

We help organizations integrate Climate Risk into their ERM

Ever since the Paris accord, Climate Risk management has become a top priority across many industries including the financial industry. Here is a quick timeline of Climate Change Policy Milestones.

A number of private coalition groups and NGOs joined forces to influence climate change towards emissions reductions. As a result, a plethora of Climate Risk frameworks for assessing the current emissions, the reduction targets and necessary KPIs and their diclosure evolved. In the financial sector, Task Force for Climate related Financial DIsclosure or TCFD was formed with specific guidelines on how to report climate risks and opportunities by companies so that their stakeholders are better informed about the company's actions towards sustainabile development.

Our expert advisors have been helping organizations with climate risk assessment - physical and transition risks, climate risk data sourcing and governance, climate risk models and scenario building including IPCC (SSP), IEA and NGFS scenarios, ESG alignment and TCFD disclosures.

We have successfully managed climate risk related programs at several financial institutions. To find out how we can help you please contact us.

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Weather- Meant to be short-term, local, point in time atmospheric conditions such as temperature, precipitation, pressure and humidity.

Climate - Meant to be average weather patterns over a longer period of time (years, decades) across the globe.

Greenhouse Effect - Global Warming i.e. sustained rise in average temperatures across the planet due to heat (solar radiation) being trapped by anthropogenic emissions called greenhouse gases in the atmosphere

Greenhouse Gases - CO2 (about 80% of US GHG) comes mainly from fossil fuel combustion for energy, Methane (CH4), which comes from landfills, coal mines, agriculture, and oil and natural gas operations, Nitrous oxide (N2O), which comes from using nitrogen fertilizers and certain industrial and waste management processes and burning fossil fuels, High global warming potential (GWP) gases, which are human-made industrial gases, Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs), Sulfur hexafluoride (SF6), Nitrogen trifluoride (NF3) - source U.S. Energy Information Administration

Climate Change Climate change is a gradual rise in global teperatures since the industrail revolution began circa 1850 due to GHG emissions and other second order effects, resulting in extreme weather events - floods, hurricanes, droughts and the long term effects such as melting ice and rising sea levels.`

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Sustainability- Humanity will meet current economic needs without overburdening the natural environment to ensure future generations will be able to meet their economic needs.

SDG - Stands for Sustainability Development Goals. 17 goals defined and subdivided into 169 targets. Environmental (E) goals include those on climate action (SDG 13) and nature-related goals to protect life on land and life in the water (SDGs 14 and 15). Social (S) goals include those dedicated to ensuring good health (SDG 3), quality education (SDG 4), and gender equality (SDG 5), among others. Economic goals include those for good jobs (SDG 8), innovation and infrastructure (SDG 9), and responsible consumption (SDG 12).See UN Sustainable Development Goals

ESG - Environmental, Social and Governance. Sustainability is the broadest concept, encompass-ing public and private action; ESG is typically used by the private sector to measure companies and screen investments.

Sustainability Targets - UN defined specific targets for SDG. For example, SDG 7 is affordable energey and its targets are to by 2030 substantially increase the share of renewable energy in the global energy mix, by 2030 double the global rate of improvement in energy efficiency among others.

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TCFD- Task Force for Climate related Financial Disclosures. Widely accepted, being considered by Central Banks for their prudential supervision of climate risks at financial institutions.

SASB - Sustainability Accounting Standards Board was founded in 2011 to provide cross-comparable sustain-ability metrics. Defines key dimensions for climate change - Environment, Leadership & Governance, Business Model and Innovation, Soicial Capital and Human Capital. Gained prominence due to Blackrock requiring investee companies to disclose corporate performance in line with SASB metrics and recommendations

GRI -Global Reporting Inititiative started after Exxon Valdez disaster in 1997 with a set of guidelines and subsequently evolved into a disclosure framework with reporting standards.

WBCSD - The World Business Council for Sustain-able Development was formed after the UN Rio Summit in 1992, and it does research on corporate social responsibility and shares best practices on sustainability among its members.

PRI - Principles for Responsible Investing for Asset Managers.There are 6 Principles for Responsible Investment, these are a voluntary and aspirational set of investment principles and possible actions for incorporating ESG issues into investment practice.

PSI - Principles for Responsible Insurance for Insurance Companies. Launched in 2012, 4 Principles for Sustainable Insurance to guide better management of ESG issues and help insurance industry’s contribution to building a sustainable society.

PRB - Principles for Responsible Banking for Global Banks. 6 Principles for Responsible Banking for a sustainable banking system. Sustainability incorporated at the strategic, portfolio, and transactional levels, and across all business areas.

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Climate Opportunity - Refers to the potential positive impacts related to climate change on an organization such as through resource efficiency and cost savings, the adoption and utilization of low-emission energy sources, the development of new products and services, and building resilience along the supply chain.

Climate Risk - Refers to the potential negative impacts of climate change on an organization. Physical risks emanating from climate change can be event-driven (acute) such as increased severity of extreme weather events (e.g., cyclones, droughts, floods, and fires). They can also relate to longer-term shifts (chronic) in precipitation and temperature and increased variability in weather patterns (e.g., sea level rise). Climate-related risks can also be associated with the transition to a lower-carbon global economy, the most common of which relate to policy and legal actions, technology changes, market responses, and reputational considerations.

Disclosure Areas - Decription of a company's Governance, Strategy, Risk Management, Metrics and Targets around climate risks and opportunities.

Disclosure Principles - Disclosure should be relevant, specific and complete, clear balanced and understandable, consistent format across time, comparable within a sector, industry or portfolio, reliable verifiable and objective and timely.