A proliferation of climate adaptation strategies and transitioning planning, alongside an increase in demand for climate tech skills and the integration of financial planning within carbon management platforms, were among the predictions for 2024 by research firm Verdantix.
Greater pressure from an increasing amount of regulatory reporting was cited as a primary reason for these potential changes, with the EU’s Corporate Sustainability Reporting Directive (CSRD), the UK’s Sustainability Disclosure Requirements (SDR)and other regulations due to come into effect in 2024.
Below is a summary of some of the key predictions for the year ahead.
At least 40% of Fortune 500 companies to begin work on climate adaptation strategies
In 2022, S&P Global carried out a survey of over 6,000 corporates and found that only about 20% had adaptation plans in place. But this is set to change in 2024, according to experts at Verdantix, with at least 40% of Fortune 500 companies beginning work on their climate adaptation strategies.
2023 set a new record for the number of disasters that caused billions of dollars’ worth of insurance claims in the US alone, with data suggesting this number has been steadily increasing since 1980. Globally, the number of droughts, heat waves, wildfires and flooding has also increased, leading to insurers and investors beginning to ask companies about their adaptation plans more frequently.
“We’ve seen several lawsuits against corporates for failing to adapt, which means that practitioners need to start strengthening their adaptation expertise and learn about what goes into adaptation planning,” said Verdantix industry analyst, Alice Saunders.
“Once a company has a risk assessment in place, they can then start updating resources to implement their plans and establish monitoring and evaluation systems. Additionally, as these corporates start to act, this will affect their risks and vulnerabilities, and create new learning opportunities to help revise those action plans and identify new priority actions.
“While identifying and starting to implement adaptation actions is quite new, high-quality adaptation plans need to be able to continually evolve, meaning that building capabilities in these areas for corporates as well as vendors will be key in the coming year and beyond.”
Most transition plans published in 2024 will not contain binding governance clauses
The 2023 Taskforce for Climate-related Financial Disclosures (TCFD) status report – based on 2022 data – found the number of firms disclosing under the board oversight recommended TCFD disclosure increased significantly in the three years analysed. Verdantix experts said they’re expecting a similar trend throughout 2024, where board commitments and responsibilities will be mentioned in transition plans, but with no binding clauses.
However, this does not mean that there won’t be consequences in terms of reputational risk. Verdantix industry analyst Alessandra Leggieri said, because of new climate-related regulations, more firms will start publishing their transition plans and therefore the commitment of the board to meet certain targets will be under greater scrutiny and opening the door to litigation and reputational risk.
“An example from 2023 is Client Earth versus Shell UK, the first case in which a firm’s board was challenged in court on its failure to prepare for energy transition or to set the right targets, exposing the firm to risk,” noted Leggieri.
“Even though the case was ultimately rejected by the UK High Court, climate litigations are on the rise globally, and they will continue to rise in 2024, exposing firms to significant reputational risk.”
Climate tech skills to be among the top five professional training programmes in 2024
Scenario analysis, carbon accounting and geospatial analysis are expected to be among the climate tech training regimes most in demand in 2024.
This is based on two key factors. Firstly, Verdantix’s 2023 global corporate survey found that 86% of sustainability leaders noticed that their current climate-dedicated teams were too small, with an obvious need to increase the size of these teams going forward.
This links to the second factor, which is that there are currently more open climate-related positions than there are climate-dedicated professionals. Consequently, there is more demand for employees with credentials in climate-related disciplines, meaning that firms will have to look internally to upskill their employees to bridge the gap.
“A key area of this will be an increased level of upskilling in geospatial experts. In Verdantix’s view, businesses currently undervalue the importance of biodiversity in nature, both in terms of impact to nature but also nature’s impact on businesses,” said Gus Brewer, analyst at Verdantix.
“The World Economic Forum, for example, estimate that $44trn in economic value generation is at risk through the dependence of businesses on nature and related services. So, with the physical impacts of climate change increasing, we expect to see greater emphasis given to the topic of nature and biodiversity, leading to firms needing to invest in geospatial experts to understand their nature risks and opportunities.
“Coupled with this, we’re also seeing increasing regulation in 2024, with the likes of the Taskforce for Nature-related Financial Disclosures and the EU’s CSRD coming into effect. This will require 49,000 more firms to comply with biodiversity disclosures, which, once again, will lead to the need for extra geospatial experts to help understand this complex data.”
Carbon management vendors to launch financial reporting integrations
CSRD and regulation is also the basis for the prediction that carbon management vendors will launch financial reporting integrations. According to Verdantix’s research director, Ryan Skinner, increased regulation will mean that businesses are going to need to become proficient and effective at incorporating key emissions data into their financial reporting workflow, with carbon management software vendors increasingly asked to incorporate such data in a bi-directional process.
“Enterprises will need to navigate the shift from emissions reporting as a sustainability prerogative to a financial management prerogative,” predicted Skinner.
“Today, carbon management software vendors are aggregating emissions data across the enterprise to support sustainability reporting mechanisms. But, as we start to get into the new year, there’s going to be a lot more focus on pushing that data through to financial software and reporting so that enterprises can associate entity-level emissions with specific reporting instances, align emissions with various transitional scenarios and manage the boundaries for greenhouse gas reporting.
“Some businesses have already made a start on this, but we expect many more to build out their current management capabilities to meet the demand from buyers.”
