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3 maxims to drive your climate risk management

Roselyne Renel, Global Head of Enterprise Risk Management, Standard Chartered BankExtreme weather events, failure of climate-change mitigation and adaptation, and natural disasters are the top 3 risks most likely to happen according to the World Economic Forum’s 2019 Global Risk Report. These 3 risks are also among the top 5 in terms of impact, so how do we ensure that the global economy adapts in the face of this challenge? Roselyne Renel, Global Head of Enterprise Risk Management, Standard Chartered Bank, shares how she puts words into action and shows us the mindset that is necessary to succeed.

Climate change is often a phrase that brings devastating images to mind – polar ice melting, sea level rising and gigantic storms wiping out entire cities. It is perhaps even more scary to think that these images are not improbable exaggerations. The overwhelming majority of research and science suggests this is indeed where we are headed – a deeply disturbing personal thought, a problem too big and complex for anyone to solve individually. We can all take small steps – print one document less a day, take public transport to work and home, reduce waste. All of this adds up and helps, but let’s face it – even our collective best individual efforts will most likely not be enough to reverse the course of climate change. So what do we do?

We are in the business of prosperity. As custodians of money and intermediaries of financing, we, banks, are at the centre of the transition that needs to happen. But for us to take it forward meaningfully, we need to understand it in our language – the bankers’ language: What are the risks? What are the opportunities? And for those of us in risk, how do we meaningfully assess the risks to manage them and optimise our portfolio, in a way which is sustainable in both accounting terms for us and for the planet which we call home?

On 6th December 2018, I led a panel discussion at the annual RiskMinds International conference on “climate change in business”. I was joined by Gaurav Ganguly, Head of Group Risk Economics, HSBC, David Coleman, Managing Director, Risk Management, European Bank for Reconstruction and Development (EBRD), Andrew Hammond, Senior Vice President, Enterprise Risk, RBC, and Charles Donovan, Director of the Centre for Climate Finance & Investment, Imperial College London.

The discussions were intriguing to say the least – ranging from our personal anecdotes (e.g. how someone now has to bake his own cookies because the company which used to produce his favourite cookies had to be shut down due to climate events!) to how the banks play a role in a smooth transition to a low-carbon economy to contain climate change.

The overarching theme emerging from the discussion was that none of us know all the answers yet, but it is a globally important topic that warrants an all-hands-on-deck approach to finding the answers. As the event concluded, I could not help but feel a sense of pride as a representative of Standard Chartered Bank (SCB) leading this initiative. The sense of pride was immediately followed by a simple question which we are encouraged to ask at SCB – how do I put words into action?

For me, it all comes back to SCB’s core valued behaviours.

#DoTheRightThing

We need to develop a framework, so we can consistently identify, assess, monitor and manage the risks. Where our clients are more sophisticated at climate risk management, we need adopt the best practices from them. Where our clients are more vulnerable to these risks but do not have the capability to assess or manage these risks, we need to lend a helping hand to them. At the same time, we need the framework to inform areas of opportunities, enabling our business colleagues to unlock the potential in our client relationships.

#NeverSettle

We need to challenge ourselves with exponential thinking as we build our risk management approach. How do we create a tool that actually helps our colleagues and our clients? Could we make it real-time and granular location based? We do not know all the answers at this point, but that should not deter us from setting the wheels in motion because we know reasonably well what the right direction is.

#BetterTogether

We need all parts of the bank to come together to deliver a meaningful solution. We will need to collaborate with external experts where necessary and of course our regulators, and learn from each other throughout the journey. We have proved multiple times in the past that when we put our minds to something and all of us row in the same direction, we can turn significant headwinds into tailwinds; we need to do the same with climate.

There is complex econometric and statistical modelling, uncertain climate scenarios and multiple pathways to the same outcome and a thousand other reasons for us to wait for someone else to come and show us the way. Or, we take this challenge head on and fire our engines (definitely not fossil fuel powered though!) – and lead the way in the financial industry and the risk management space. The votes from our regulators, investors, clients, management team and colleagues are in – we are going to be front and centre in the world’s transition in thinking!

Given what is at stake here, this is one area which we cannot afford to get wrong. With all of us putting our collective best foot forward, I am confident we will thrive on this challenge and open the doors to new opportunities in the near and long term future.

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