Reading Climate Risk Like A Balance Sheet

Climate risk has evolved from an environmental issue into a core financial function, directly impacting balance sheets, asset valuations, and the cost of capital. It manifests as physical, transition, and liability risks that alter accounting estimates, including asset impairments and expected credit losses. Standardized frameworks like ISSB and India's BRSR require rigorous disclosures, robust internal controls, and independent assurance over emissions data. Incorporating green bonds, climate due diligence, and carbon management into corporate strategy directly protects long-term enterprise value. Ultimately, finance leaders must look beyond historical numbers to price future climate risks into strategic capital allocation and investment decisions.

Climate risk no longer waits for the annual sustainability report. It shows up earlier- in impairments, provisions, credit ratings, insurance premiums, and the price a company pays for capital.

CLIMATE RISK HAS ENTERED THE FINANCE FUNCTION

Until recently, climate change was viewed largely as an environmental issue, while finance teams rarely considered it material unless the organisation belonged to a heavily polluting industry. That assumption no longer holds. Cli