A New Way to Evaluate Climate-related Transition Risks and Opportunities

Transition risks and opportunities arise from the world’s transition to a lower carbon economy, as well as corresponding policy, legal, technology and market changes needed to address mitigation and adaptation requirements.

These risks and opportunities are multifaceted and can result in financial and reputational impacts depending on the nature, speed and focus of these changes. For businesses, managing transition risks is crucial as they can significantly impact the financial stability and long-term viability of an organization.

However, the low carbon transition also presents exciting opportunities that companies can leverage to enhance their business and establish a strong, enduring presence in the market.

Emerging regulatory drivers — such as the European Union’s Corporate Sustainability Reporting Directive (CSRD), the International Sustainability Standards Board (ISSB) sustainability-related standards S1 and S2, and the California Climate Laws — require companies to report information on relevant risks and opportunities. Failure to effectively navigate these risks can result in increased operational costs, reduced market share and potential regulatory penalties, among other risks.

Sounds scary, right? Fear not, TROY is here to help. 

WSP’s Transition Risk and Opportunity Analyzer Tool (TROY) is a cutting-edge tool designed to create an efficient, robust and transparent transition risk and opportunity scenario analysis that supports qualitative to quantitative risk and opportunity assessments.

TROY’s main purpose is to automate transition scenario data collection and analysis, utilizing a data-driven approach to qualitatively score and assess a company’s risks and opportunities, which will support compliance efforts and help develop useful messaging for stakeholders via clear visuals.  

TROY is built with three key objectives: 

• Efficiency: The tool allows for automated processing of key scenario indicators and datapoints used in scenario analysis, such as those found in the Network for Greening the Financial System (NGFS) climate scenarios. The data-driven approach used to assess risks and opportunities results in clear, qualitative scoring that is reproducible and reliable and conveys the results and quantifies uncertainties. By automating complex calculations and data processing, TROY ensures consistency and accuracy in every analysis. 
• Transparency: Every step of the process is documented and communicated clearly, providing transparent analyses ensuring clients understand how conclusions are reached and can trust the insights provided. 
• Adaptability: The tool is designed to be easily adjustable based on client-specific needs and updated data sources. Whether it’s a small enterprise or a Fortune 500 corporation, analyses can be customized to align with changing business requirements. This flexibility ensures that analyses remain relevant and tailored to the unique circumstances of each client. 

WSP has a proven track record of partnering with Fortune 500 companies. TROY is WSP’s latest effort to help companies navigate the complexities of transition risks and help realize emerging opportunities, integrating advanced socioeconomic and financial models customized to complete both qualitative and quantitative scenario analyses and meet the specific needs of each client.

The methodology includes: 

• Comprehensive Risk Assessment: Evaluation includes a wide range of transition risk drivers, including regulatory and policy changes, technological advancements, market shifts and evolving consumer behaviors. Each driver is analyzed for its potential impact on business and client-specific risk frameworks, which are fully integrated into the analysis to ensure alignment with a company’s existing evaluation of risk. 
• Opportunity Identification: Beyond risk assessments, TROY identifies opportunities that arise from the transition to a low carbon economy. This includes potential cost savings from energy efficiency measures and renewable energy, new market opportunities in green technologies, increased revenue from offering new low carbon products and services, and enhanced corporate reputation. By identifying and capitalizing on these opportunities early, companies can increase revenue, secure market share and establish a lasting presence in their industry. 
• Tailored Solutions: Solutions are specifically tailored to each client’s industry, market position and strategic goals. This personalized service maximizes the relevance and effectiveness of all recommendations.  

TROY is the latest tool developed at WSP to help companies navigate the complexity of climate risk. WSP pairs TROY with our expertise as a global engineering firm with experience across numerous industries, including transportation and infrastructure, energy and resources, climate finance, technology and more.

The firm’s global sustainability and climate professionals collaborate with clients and WSP subject matter experts to deliver a comprehensive and customized evaluation that aligns with the specific requirements of each company. WSP’s TROY tool delivers: 

• Custom Risk and Opportunity Reports: Detailed reports that outline the specific risks and opportunities relevant to the client’s business, complete with actionable recommendations. 
• Scenario Analysis: Exploration of various future scenarios to understand potential outcomes and develop robust strategies to mitigate risks and capitalize on opportunities. 
• Stakeholder Engagement and Communication: Support in communicating transition risk management strategies to stakeholders, including investors, regulators and customers. 

Through collaboration with WSP to use TROY as a tool for transitioning to a lower carbon economy, companies will proactively manage transition risks, seize emerging opportunities navigate evolving regulations and new sustainability standards, and position businesses for long-term success in a low-carbon economy.

For more information, contact Kim Frauhammer.