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Introduction:
Welcome to another installment in our Mastering ESG series, where we focus on equipping businesses with the tools to meet evolving sustainability standards. Today, we’re tackling an essential skill for any organization—training your teams to both identify and disclose climate risks as outlined under AB-1305. With increasing regulatory attention on climate-related financial disclosures, this knowledge has become a business imperative that goes beyond compliance to support long-term resilience.
Here are three key takeaways from this guide:
1) Why climate risk disclosure is critical for corporate sustainability and compliance.
2) A step-by-step framework for effectively educating your team on climate risks.
3) Practical examples that illustrate success in training programs of this kind.
Why This Matters:
As climate risks become increasingly material to organizations, shareholders, and the public, regulators are stepping in. AB-1305 requires companies to integrate these risks into financial statements and decision-making processes. A KPMG survey revealed that 65% of global CEOs feel a growing pressure to act on sustainability disclosures. Moreover, investors are beginning to penalize organizations that fail to manage and disclose their environmental risks appropriately, heightening the urgency.
Beyond compliance, training teams to recognize climate risks enables companies to remain competitive in an ESG-conscious market. For instance, PG&E’s bankruptcy following climate-related liabilities illustrates how a failure to comprehend such risks can bring about catastrophic consequences.
Step-by-Step Instructions:
Step 1: Build Foundational Knowledge Educate your teams on the basics of climate science, including terminology like physical risks, transitional risks, and valuation impacts. This foundational understanding ensures that employees can spot potential risks in their specific functions.
Pro Tip: Use free online resources, such as the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations, as initial training tools.
Step 2: Customize Training by Department Create tailored learning modules that address the climate risks relevant to specific areas—such as supply chain disruptions for procurement teams or resource scarcity for operations. This ensures the training resonates and is actionable.
Pro Tip: Leverage cross-departmental workshops to encourage knowledge sharing.
Step 3: Promote Scenario Analysis Train teams to work with climate scenarios to assess how various levels of warming (e.g., 1.5°C vs. 3°C) could impact your business. This introduces forward-looking planning into your decision-making process.
Pro Tip: Use available tools like scenario-modeling software to simplify this step.
Step 4: Centralize Reporting Protocols Create standardized protocols for documenting and escalating identified risks. Ensure that frontline employees understand reporting lines and criteria. This keeps the disclosure process both consistent and audit-ready.
Case Study:
Consider the example of Unilever, a global leader in sustainability reporting. The company introduced regular training and workshops tailored to different departments, ensuring all teams understood and could contribute to risk identification. By creating a company-wide culture of awareness and disclosure, Unilever was able to publish detailed climate risk assessments that improved investor confidence and earned accolades within the ESG community.
Mistakes to Avoid:
1. Rushing Training: Don’t rush through the process without proper team engagement; this often leads to poor understanding and inconsistent application. Engage employees through interactive formats like workshops or Q&A sessions to cement their knowledge.
2. Failing to Update Content: Climate science and regulatory requirements are constantly evolving. Using outdated training materials undermines your program’s relevance. Regularly revise your content and refer to regulatory updates.
3. Lack of Leadership Involvement: If leadership does not champion the training efforts, employees may not take them seriously. Secure executive buy-in and communicate the importance of training throughout the organization.
Next Steps:
In this guide, you’ve learned the importance of educating teams for climate risk identification and disclosure, along with actionable steps for building an effective training program. By following these best practices, you’ll not only achieve compliance with AB-1305 but also strengthen your organization’s long-term sustainability strategy. Stay tuned for our next blog in the Mastering ESG series, where we’ll delve into innovative tools for ESG reporting.
David Hernandez has spent years researching environmental sustainability and enjoys sharing his knowledge. He has spent over 15 years working with major firms, integrating ESG factors into portfolio analysis and decision-making. He is a frequent speaker at conferences and workshops, educating investors on the benefits of ESG investing.
