Storylines can help businesses to understand and communicate climate risks.
With anticipated changes to financial reporting requirements and new environmental policies in Australia, businesses are finding they need a simple way to assess the impact of climate change on their assets and operations. However, as climate conditions are constantly developing, it can be hard to accurately predict long term impacts and explain these in a clear and concise manner.
Dr Tanya Fielder, Senior Lecturer and Scientia Fellow at the UNSW Institute for Climate Risk & Response, has led new research on how narratives can provide an effective way of communicating the impacts of climate change.
A narrative for the future
In Dr Fielder’s recent paper, Storylines: A Science-Based Method for Assessing and Measuring Future Physical Climate-Related Financial Risks, she seeks to make connections between climate science and business accounting.
“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.
“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.
“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.”
That’s where storylines come in. First developed by climate scientists, storylines use both climate model projections and other relevant evidence to create a narrative about the future which can help others understand the current practices which need attention.
Addressing current communication concerns
Australia is beginning to recognise the financial risks associated with climate change, leading to a focus on mandatory climate reporting and clear planning in government policies. However, current methods of understanding and communicating the risks associated with the climate aren’t as effective as they could be.
Dr Fielder’s research highlights these limitations, and suggests storylines are a more effective approach for Aussie businesses.
“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 Fielder’s work is an important step towards combining science, accounting and finance.
“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.”
Regulators are becoming increasingly concerned with the ability for organisations to outline their climate-related financial risks, which can lead to the risk of false precision and possibly even litigation. As storylines focus on plausibility over probability, and leave room for uncertainty, they could save many businesses through integration into plans and practices.
To read about how Aussie businesses can prepare for tightening privacy regulations, click here.