Nine months on from the recommendations by the Task Force on Climate-related Financial Disclosures (TCFD), there has been significant corporate and investor activity in this area, confirmed by today’s (19 March) report which looks at the disclosure performance of 1,681 multi-sector companies across 14 countries.

More than eight in 10 (83%) of companies recognise that climate change poses physical risks for their business, while an even higher number (88%) identify policy and regulatory changes as the main risks of transitioning to a low-carbon economy.

However, there appears to be a gap between awareness and action, particularly at the boardroom level. For instance, while a significant majority report board oversight of climate-related matters, only 1 in 10 provide incentives for board members to manage climate change issues.

CDP’s task force engagement director Jane Stevensen stressed that driving board level engagement with climate-risk is a crucial tool to accelerate corporate climate action.

“Overall, we see there is a surface level of preparedness from companies globally to have board level oversight of climate risk and opportunity. Key drivers are investor action, company reputation and consumer reaction to climate risk,” Stevensen said.

“What we are not seeing is increased governance translating into climate change mitigation. 2018 is the year when companies need to step up climate action as we approach a tipping point.”

Leaders and laggards

Launched in 2015 by Michael Bloomberg and Bank of England governor Mark Carney, the TCFD has developed voluntary climate-related guidelines for use by companies in providing information to lenders, insurers, investors and other stakeholders.

The final recommendations are supported by a host of multinational firms, including the likes of Unilever, Barclays and HSBC.

Companies in the UK are among the global leaders in disclosing information on climate risks, according to CDP’s report. The UK has the highest proportion of companies with board oversight with climate change (96%) and the highest number of companies disclosing scope 1 and 2 emissions (97%).

The UK Government officially endorsed the TCFD recommendations in September 2017, and encouraged all listed companies to integrate risks and opportunities posed by climate change into mainstream financial disclosures.

The CDP report estimates that one-third (35%) of UK-based firms will be using a carbon price by 2019. One particular cause for concern for the UK is that only 17% of financials companies disclose scope 3 emissions from investments.

At the other end of the spectrum, businesses from China, the healthcare and financial sectors are lagging behind the four areas of disclosure identified by the TCFD – governance, strategy, risk management and metrics and targets. But China remains a disclosure market to watch out for in 2018 as new mandatory reporting policy come into force.

Organisations following the TCFD are encouraged by CDP to embed it into corporate culture by setting emission reduction and renewable energy targets. CDP also urges businesses to conduct analysis for different climate scenarios, including a 2C or lower world.

“This analysis shows that the financial implications of climate change are now firmly on companies’ doorsteps and should be integrated in company-wide processes,” said Climate Disclosure Standards Board’s managing director Simon Messenger.

“It is now the time to set up clear strategies to tackle companies’ exposure to climate risks and seize new economic opportunities. It is also clear that the management of environmental issues can no longer be the sole responsibility of sustainability teams: it needs to be a priority area for companies’ boards to ensure it is truly embedded into their strategic priorities.”

George Ogleby

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie