Climate disclosure enters ‘mainstream’, but better reporting required, warns TCFD

That is according to the TCFD’s 2018 Status Report, which was presented to the Financial Stability Board (FSB) today (26 September). The report provides an overview of the disclosure practices of nearly 1,800 companies.

The Status Report found that the majority of companies are already disclosing certain climate-related information in a way that is aligned with the TCFD recommendations. The TCFD welcomes this trend, noting that companies have had a “very limited” timeframe to align internal practices since the Task Force’s first report in 2017.

However, the report claims that companies have the ability to adopt more of the TCFD’s recommendations. Notably, very few companies were found to disclose the financial impacts that climate change has on a business, while disclosure is still most prevalent in traditional CSR reports, rather than integrated into financial filings.

The report also notes that information on the performance and resilience of company strategy under a range of different future climates – known as scenario analysis – is also limited.

“The more companies know about the risks they face, the faster and more effectively they can address them — and the more they report that information, the better-equipped investors will be to make smart decisions,” the TCFD’s chair Michael R. Bloomberg said.

“It is encouraging to see the Task Force’s group of supporters continue to grow. It will make the global economy more resilient and drive more capital to projects that are helping to reduce emissions and protect people from harm.”

Numbers game

The 1,800 companies examined by the TCFD ranged from banks, insurance companies, asset managers, and asset owners, to energy, transportation, materials and buildings, and agriculture, food, and forest products manufacturers.

Encouragingly, the 513 organisations that have expressed support for the TCFD’s recommendations have a combined market capitalisation of $7.9trn, with supporting financial firms responsible for assets totalling $100trn. In comparison, the Bank of England’s governor and FSB chair, Mark Carney, claimed that close to $7trn would need to be spent on new green infrastructure across the globe in order to cut carbon emissions over the next 20 years.

“Today’s announcement shows that climate-disclosure is becoming mainstream. The TCFD’s status report based on companies’ 2017 financial filings, demonstrates the practical, decision-useful nature of the recommendations,” Carney said.

“As preparers, financial institutions and investors ‘learn by doing’, a virtuous cycle will be created where more and better information creates the imperatives for others to adopt the TCFD and for everyone to up their game on the quality of information they provide.”

The TCFD will continue to promote and monitor disclosure practices over the next 12 months and will deliver its second status report in June 2019.

The TCFD’s recommendations were discussed in-depth by a group of sustainability experts outlining what the future holds for reporting. You can read a comprehensive round-up here.

CDP’s chief executive Paul Simpson added: “Climate change is a systemic risk to the market, so it is encouraging to see the gathering momentum behind the TCFD recommendations across industries worldwide, moving climate change firmly up the board agenda.

“We fully support the work of the TCFD and have updated our disclosure platform to align with the recommendations, in order to facilitate widespread market adoption. This will be a significant lever in the market to increase the quantity, and quality of disclosures that will enable companies to report in line with the TCFD recommendations. Crucially, it also means that over 6,800 companies will have prepared TCFD-aligned disclosures through CDP so far this year.”

Matt Mace