Project Case Study

Greenhouse Gas Accounting Assessment for PE Fund Portfolio

Challenge

Challenge

A leading distributor of commercial doors, frames, hardware, and integrated electronic security systems with over 110 branch and manufacturing locations nationwide was preparing to comply with California's Climate-Related Financial Risk Act (Senate Bill (SB) 261). The company needed to understand its exposure to climate-related risks across its diverse operational footprint and supplier network. 

The company faced several key challenges: 

  • Regulatory Compliance: Meeting California's SB 261 requirements for biennial climate-related financial risk reporting aligned with the Task Force on Climate-related Financial Disclosures (TCFD) framework 
  • Portfolio Complexity: Assessing climate risk across 113 operational sites including offices, warehouses, manufacturing facilities, and data centers, plus 37 tier-one supplier locations 
  • Uncertainty Management: Understanding exposure under multiple climate scenarios to inform strategic planning and risk mitigation 
  • Data Gaps: Establishing a baseline assessment when climate risk processes were not yet formalized across the organization 
  • Stakeholder Expectations: Addressing emerging expectations from investors, customers, and other stakeholders regarding climate risk management 

Without a comprehensive understanding of both physical and transition climate risks, the company lacked visibility into potential operational disruptions, asset vulnerabilities, and strategic threats that could impact long-term business resilience. 

Solution

Solution

FSI conducted a comprehensive climate-related financial risk assessment following the TCFD framework, combining quantitative physical risk modeling with qualitative transition risk analysis. 

Physical Risk Assessment 

Utilizing a physical risk mapping platform, FSI analyzed 150 locations across the company's operational footprint and supply chain for exposure to 12 distinct climate hazards.  

Risk exposure was evaluated across three time horizons—2027, 2030, and 2035—under two IPCC climate scenarios: SSP1-2.6 (low emissions, <2°C warming) and SSP5-8.5 (high emissions, >4°C warming). 

Transition Risk Assessment 

FSI conducted a qualitative assessment of policy and legal risks, technology risks, market risks, and reputational risks through third-party research and executive interviews. Each risk was evaluated across both climate scenarios and all three time horizons to determine financial materiality. 

TCFD-Aligned Reporting 

FSI developed comprehensive documentation addressing all four TCFD pillars: Governance, Strategy, Risk Management, and Metrics and Targets. 

Impact

Impact

The assessment provided clear understanding of climate risk exposure and a roadmap for enhanced resilience: 

Regulatory Compliance 
  • Delivered a TCFD-aligned climate-related risk report meeting California SB 261 requirements with documentation suitable for biennial public disclosure 
Risk Visibility and Strategic Planning 
  • Identified geographic concentrations of physical climate risk and supplier vulnerabilities, enabling targeted climate risk mitigation strategies 
  • Provided scenario-based insights to inform long-term capital planning, facility investments, and risk-informed acquisition due diligence 
  • Highlighted gaps in current climate risk management processes for future enhancement 
Stakeholder Value 
  • Created transparent disclosure demonstrating proactive climate risk management 
  • Positioned the company to meet evolving expectations from investors, customers, and stakeholders 

The assessment transformed the company's approach from reactive compliance to proactive climate risk management, establishing a foundation for enhanced business resilience. 

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