Julie Hutchison explains why charities need to start being more aware of the threat of climate change
“Shifts in our climate bring potentially profound implications for insurers, financial stability and the economy,” the governor of the Bank of England said just last year.
Here in Scotland, when it comes to extreme weather events, we need look no further than this winter’s flooding affecting communities from the Borders to Aberdeenshire. Charities have the opportunity to take a forward-looking approach and assess both the strategic and operational risks facing them.The governor of the Bank of England’s speech is well worth reviewing when it comes to the economic risks of climate change. Together with Christopher McCall QC’s Opinion last November on charity trustee investment duties in the context of carbon intensive assets, and there is much to reflect on in this evolving area.
What do charities need to think about in assessing climate change resilience? My summary involves 4 Ps : people, property, processes and portfolio.
People
Charities operating near the Tweed and the Don may already have first-hand experience of this. As the UN noted in the Paris Agreement last December, early warning systems and emergency preparedness are both part of climate change resilience. People’s safety is front of mind. How might a charity’s employees, beneficiaries, board and donors be affected? What contingency plans might be needed?
Property
If a charity has premises (owned or rented), how might these be impacted by extreme weather? What insurance is in place? If the property is in an area which floods, what alternative options are there for re-location? The insurance premium may increase at the next renewal date: how will this be funded? The Governor of the Bank of England pointed to a three-fold increase in the number of registered weather-related loss events since the 1980s, as more insurance claims are now being made due to extreme weather. Reviewing a charity’s insurance position will be worthwhile.
Processes
Some charities may already undertake environmental audits, including travel and procurement policies. For example, a charity which owns a building will have choices about its energy supply and efficiency measures. Many aspects of a charity’s operations could be analysed in terms of their carbon footprint. The Charity Finance Group website offers examples of a range of sustainability policies.
Portfolio
An area prompting much debate is the question of whether or not to divest from fossil fuels, within a charity investment portfolio. One Scottish university has already made a key decision in this direction. The forthcoming Edinburgh International Science Festival features a debate on this issue. A recent contribution to the evolving legal landscape here is the Opinion from Christopher McCall QC, which is essential reading for charities with environmental or wildlife preservation purposes in particular, as well as charities with health or poverty purposes. The key point to reflect on is whether particular investments may run counter to a charity’s purposes. It’s also relevant to consider if a donor may end their support for a charity, or a beneficiary decline to be supported, due to the investment decisions made by the board. This is a topic in its own right involving much to be weighed-up.
Julie Hutchison is a charities specialist at Standard Life Wealth
