Navigate risks & opportunities of the low carbon transition: four key actions

As more firms attempt to anticipate the ongoing transition to a low carbon world, it is important to look for opportunities, as well as risks, to ensure your business remains resilient.

Download now [Case Study]: An approach to integrating climate risk into an existing ERM framework

As part of our latest climate risk series of member meetings, risk professionals from the energy sector recently discussed how they are identifying and managing both the risks and opportunities of the energy transition. They shared lessons learned that are also applicable to other industries too.

For most, working closely with the strategy team is key. More specifically, these members gave two important pieces of advice for those who are not yet taking a proactive approach to climate risk management:

• pivot around, and into, the opportunities of the energy transition
• recognise that standing still is a risk

As such, identifying potential opportunities is crucial. This could be in the form of adopting new technologies, adapting current assets or striking up new partnerships with governments and/or industry peers.

Aligning such actions with overall company strategy, our members believe, is key to identifying and managing both risks and opportunities for organisations facing the energy transition – and many would argue all organisations face this challenge. It’s also a way to move climate-related disclosures beyond a simple tick-box exercise.

How to identify and manage energy transition risks and opportunities

One of the more advanced approaches, tried and tested by a member, is based on a framework centred around making the company more resilient.

The framework is divided into the three buckets:

1. Strategy
2. Operations
3. Organisation

The framework helps the organisation to highlight and discuss transition-related issues such as investment (strategy), resiliency (operations) and advocacy (organisation) internally.

How to take action on sustainability issues

Once these issues have been identified, the next step is to act. This organisation has divided potential action areas into four key pillars:

1. Invest
2. Partner
3. Develop
4. Adapt

Members have discussed with each other the activities that would come under each of these pillars, as well as what collaboration would be needed with the strategy team for each of them. This kind of teamwork should help to identify areas in which an organisation can pivot, as well as ensuring support for future M&A activity or business development plans that can be executed in a sustainable way.

Clearly, this approach relies heavily on alignment with company values, culture and strategy.

Interested in accessing the full framework and reading in detail what this transition pathway looks like? Find out more about Risk Leadership Network membership here.