Task Force on Climate Related Financial Disclosures

2022 Task Force on Climate-related Financial Disclosures

We recognise that changes to the climate present extensive risks and opportunities and that the TCFD recommendations represent a valuable and effective method of bringing about the systemic and permanent changes to business processes, practices and operations that are needed to accelerate the pace of change and protect our world.

During 2021 and 2022, we have worked to integrate the recommendations of the TCFD into our business in order to better understand and address the potential impacts on our business. Consideration of climate change and the TCFD recommendations formed part of the wider review of our environmental, social and governance (“ESG”) responsibilities undertaken in 2021, and in setting the direction of our new three-pillar ESG approach. Climate and climate-related risk are key considerations under the “Our World” pillar of the strategy.

In reporting our progress last year on integrating the TCFD recommendations into our business, we also outlined our climate change programme roadmap including further integration of the TCFD recommendations over a 2-3 year timeline. Over the course of the last six months, we have further identified and assessed the impact of climate-related risks and opportunities on our business. In this disclosure, we report the findings from this exercise in the Strategy section. We have also progressed other areas, including the further consideration of climate-related risks and opportunities in our governance structures and processes, and the implementation of a new risk management framework.

TCFD compliance statement

The Company’s TCFD compliance statement for the year ended 31 December 2022 is set out in the following table.

Recommendation	Disclosure	Compliance	Summary of progress
Governance The organisation’s governance around climate-related risks and opportunities.	a) Board’s oversight of climate-related risks and opportunities. b) Management’s role in assessing and managing climate-related risks and opportunities.	Fully compliant Fully compliant	The Board has overall responsibility for risk management and internal control (including climate-related). The Board formally reviews climate-related matters on a six-monthly basis; with climate-related risk updates included within monthly Board packs. Chief Executive, Ian Manocha, has ultimate responsibility for oversight and monitoring of climate-related risks and opportunities and integrating these considerations into the Company’s strategic response and decision-making (see page 43 for further information). The Chief Corporate & Legal Officer has operational responsibility for assessing and managing climate-related risks, with the support of management. The Risk Review Board, made up of departmental management and a Non-Executive Director, carries out quarterly reviews of Group-level risks (including climate-related). During 2023, we plan to further integrate climate-related considerations into Committee work, and continue to educate the Board and management on climate-related issues.
Strategy Actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning where such information is material.	a) Climate-related risks and opportunities. b) Impact on the organisation’s businesses, strategy, and financial planning. c) Resilience of the organisation’s strategy.	Fully compliant Not compliant Not compliant	Climate-related risks and opportunities have the potential to affect our business over the short (0-3 years), medium (3-10 years) and long-term (10+ years). We conducted a Group-wide climate risk and opportunity evaluation in 2022 (see risk heat map and table below). During 2023, we plan to conduct scenario analysis to develop a more comprehensive understanding and impact of material climate-related risks and opportunities. We will also conduct a further review of our corporate strategy and business model against climate-related risks and opportunities.
Risk management
How the organisation identifies, assesses, and manages climate-related risks.	a) Risk identification and assessment process. b) Risk management process. c) Integration into overall risk management.	Fully compliant Fully compliant Partially compliant	We have implemented a new risk management framework and completed a dedicated climate risk and opportunity assessment, which enabled us to extend time horizons beyond those we would typically consider. Further information on our new risk management framework can be found on page 43. We engaged external advisers to help us identify climate-related risks and opportunities using various inputs and sources. For each risk identified, a qualitative assessment was carried out to determine how it could potentially impact the business over different time horizons, including key assets exposed, before aligning possible impacts with appropriate financial factors. Likelihood and impact ratings, aligned to our existing risk management framework, were then assigned to each risk. Where climate-related risks have a risk rating outside of our tolerance, these risks are further considered as potential principal risks in the context of our business. Impact is determined based on potential impact on revenue, share price, reputation, business continuity, and other relevant factors. During 2023, we plan to conduct scenario analysis to further understand the potential implications of material climate-related risks, and build out medium and long-term plans to manage key climate-related risks and opportunities.
Metrics and targets The metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.	a) Metrics used to assess climate-related risks and opportunities in line with its strategy and risk management process. b) Disclose Scope 1, Scope 2, and if appropriate Scope 3 greenhouse gas (“GHG”) emissions, and the related risks. c) Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets.	Not compliant Partially compliant Not compliant	We are in the process of developing our climate-related metrics as we understand more about our climate-related risks and opportunities. Our metrics and targets (including Scope 1 and 2) are disclosed in the table below. During 2023 and 2024, we plan to further develop metrics and targets, establish baselines, measure material Scope 3 GHG emissions including purchased goods and services, and set targets against metrics in our most relevant areas.

Climate-related risks and impact

Based on our assessment to date, we have identified several potential climate-related risks, the key ones of which are outlined in the following table.

Risk	Risk description	Potential financial impacts	Time horizon	Our response/mitigating actions
Physical risks
Digital infrastructure	Floods, storms, and extreme heat is testing the resilience of vital infrastructure including data centres and cloud stability which we rely on to deliver our core services.	+ Any outages caused by damage to digital infrastructure could affect the delivery of our services, directly affecting client relationships with a negative impact on revenue and trust in Gresham’s platform and products. + The business could face increasing operating costs as data centre providers are forced to invest more in adaptation and resilience measures.	Medium-long	+ We were not impacted by any data centre outages in the year that were due to climate-related incidents, as far as we are aware. + To date, we have not been notified of any current or future cost increases linked to climate-related adaptation and resilience, although we will keep this under review.
Facilities & workforce	Heatwaves, flooding, storms and drought have the potential to damage our facilities, local infrastructure and affect the physical safety, security, productivity and availability of employees.	+ Lost revenue through impacts on business continuity. + Increased costs through reduced workforce productivity and absenteeism. + Damage to buildings and equipment could result in a financial impact through uninsured losses and increased insurance premiums.	Short-medium	+ Our new hybrid working policy, and tech offering, enables our people to operate effectively from any location. + Our BCP provides guidance and structure in the event that our facilities and/or workforce are affected by climate-related incidents. + We occupy leased offices, meaning that landlords take buildings risks. Should costs increase materially, we would review our real estate footprint. + We maintain contents insurance but should this not be available we would consider self-insuring.
Transition risks
Cost pressures	Climate-related operational cost pressures due to supplier energy price rises and increased costs of cloud computing.	+ If increased operating costs could not be passed onto customers this would affect margins and profitability with the potential to affect inward investment through our perceived attractiveness to investors. + Possible cost implications to our services could impact customer relationships and ultimately revenue if customers decide to “shop around”.	Short-medium	+ Regularly review suppliers to ensure there is positive tackling of climate-related issues, as well as the best value for money.
Reputation	We may face reputational risks if we are unable to fully understand, reduce or evidence our total carbon footprint in line with increasing stakeholder and societal expectations, or through our association with customers, suppliers and third parties for similar.	+ Reductions in revenue as a result of the impact of reputational damage on customer attraction and retention. + Increased expenditure on climate mitigation and adaptation including for example; external support, switching to more sustainable data service partners.	Medium	+ Board reviews of ESG and climate change issues on a six-monthly basis ensure these matters are regularly reviewed and considered in strategic decision-making. + Our company secretariat has been expanded to provide additional compliance oversight.
Product & competition	If the business and its solutions are not successful in supporting our customers to achieve their climate change goals, there is a risk that they will look elsewhere, or that new operators will enter and disrupt the market.	+ Reduced revenues through customer churn. + Increased expenditure on sustainability-related R&D.	Medium-long	+ We are not currently seeing any product requests related to climate change. + We respond to client procurement/sourcing requests related to climate change quickly. + Our climate change programme is designed to support our customer requirements.
Regulatory	We face an increasingly uncertain regulatory environment as a result of climate change that has the potential to change rapidly.	+ Increased expenditure on internal and external resources to comply with climate-related regulation. + Costs from any fines or penalties as a result of non-compliance.	Short-medium	+ We made investments in 2021 and 2022 to ensure compliance with TCFD and ESG requirements. + Continuing Director CPD on climate-change and ESG matters. + Climate change features on the Board agenda every six months.
Investment	As investors increasingly integrate climate-related issues into their investment decisions, our approach could make our business less attractive to investors.	+ Reduced external investment as a result of negative impacts on our attractiveness to investors.	Medium-long	+ We made investments in 2021 and 2022 to ramp up our climate change programme and broader ESG strategy. + We respond to investor enquiries on climate change and ESG.
People	Our response to climate change has the potential to affect talent attraction and retention in an already competitive labour market.	+ Increased expenditure on employees, including for example; recruitment costs, productivity losses and higher salaries to attract talent. + Reduced revenues through impact of resource challenges and talent gaps on customer relationships.	Medium-long	+ Ensure that the Group continues to address climate-related issues in accordance with regulation/legislation. + Strong engagement with our people on climate-related issues, including via the ESG Champions Network. + Publicise our climate-related initiatives with all stakeholders and externally.
Liability risks
Litigation	Climate change litigation is increasing and could manifest for our business as a result of a perceived failure to consider, mitigate or adapt to the risks associated with climate change.	+ Increased legal costs paid to cover the costs of litigation. + Reduced external investment if investors lose appetite to invest in the business. + Reduced revenues if brand equity is damaged, affecting customer attraction and retention.	Long	+ Ensuring that climate-related and ESG matters remain a focus for the Board of Directors in strategy setting and business reviews.
Transboundary risks
Financial system instability	Financial stability is increasingly under threat from climate change and increased volatility in the market could affect our future ability to raise capital and cost-base.	+ Reduction in capital and financing affecting our ability to invest in future growth. + Reduced revenues if customers reduce or defer IT investments or cease to trade. + Increased expenditure on data centres due to a higher level of customer transactions being processed by our software.	Long	+ Maintaining the stability of the financial system under close and regular review. + Ensuring financial system risks are taking into account in major or strategic decisions. + Our customer base is predominantly made up of blue-chip financial services firms with significant financial resilience. + Monitoring our customer and supplier base for exposures to financial stability risks.

Climate-related opportunities

Based on our assessment to date, we have identified several potential climate-related opportunities, the key ones of which are outlined in the following table.

Opportunity	Opportunity description	Potential financial impacts	Time horizon
Reputation	Demonstrating a thorough understanding of climate-related risks, opportunities and impacts, and integrating this into our strategy could strengthen our reputation with increasingly climate-conscious stakeholders.	Increased revenue as result of company and product differentiation and our ability to attract and retain customers, and support their sustainability ambitions. Increased external investment through an improved ability to attract investment from sustainability-focused funds. Lower recruitment costs due to increased ability to attract and retain talent.	Medium
New revenue channels	Developing new products or services (or evolving existing ones) that support climate mitigation or adaptation activities, or help facilitate the low carbon transition (for example, the processing of ESG data).	Increased revenue through new channels and product diversification.	Medium-long
Cost efficiencies	Assessing our impacts and investing in new and improved ways of working that are also more climate-friendly could lead to cost savings and increased resilience.	Reduced operational costs through, for example, reduced travel, energy efficiency measures, hybrid working/reduced office estate costs. Productivity and efficiency gains.	Short-medium

TCFD Compliance

2022 Task Force on Climate-related Financial Disclosures