How the TCFD recommendations are reshaping Moody's CSR efforts

EXCLUSIVE: Moody's Corporation's global head of CSR Arlene Isaacs-Lowe believes that adopting the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) has enabled the company to become green finance "standard-setters" and champion the benefits of transparency to the wider industry.

Moody's Corporation integrated TCFD recommendations throughout its governance and reporting framework after its chief credit officer was invited to sit on the TCFD board

Moody's Corporation integrated TCFD recommendations throughout its governance and reporting framework after its chief credit officer was invited to sit on the TCFD board

The New York-based investment giant, which operates in 42 countries and has assessed more than $16bn in green bonds over the past two years, integrated the TCFD recommendations through its governance and reporting framework for the first time last year.

The move came after Moody’s chief credit officer and chief risk officer, Richard Cantor, was invited to sit on the TCFD board by the Financial Stability Board. In its latest sustainability report, the global finance firm revealed that the move to align with the recommendations had seen Moody’s Corporation report its own environmental footprint in more depth after considering whether it should adopt scenario analysis

Speaking exclusively to edie, Isaacs-Lowe explained that signing on to the TCFD recommendations has enabled Moody’s to begin driving an industry-wide shift towards greater transparency in its disclosure of climate-related financial risks. 

“[Cantor] has been able to lend his voice to help further our views on the benefits of transparency and comparability to investors,” she said. “We are certainly of the opinion that greater transparency and, to some extent, greater standardisation of what is disclosed, would be beneficial for the wider investor market.”

Published in 2016, the main aims of the TCFD recommendations include encouraging businesses to promote senior management engagement on climate-related issues, and supporting the understanding of sectoral exposures to climate issues.

Specifically, the recommendations suggest that companies of all kinds should report on impacts of different scenarios – including the 2C pathway of the Paris Agreement – and what this would mean for the business. The concept of this scenario analysis is that it encourages businesses to explore uncertainty to create a “well-established method for developing strategic plans that are more flexible or robust to a range of future states”. 

Internal change

As part of Moody’s latest sustainability report, a statement from Cantor outlines how better access to data can improve climate-related impacts and risk and assessed and managed.

Since adopting TCFD recommendations internally, Moody’s has re-structured its sustainability governance model to form a CSR council, headed by its chief executive, Raymond W. McDaniel Jr. The council is responsible for approving the company’s sustainability strategies, in line with the TCFD’s recommendation that finance firms adopt a level of flexibility to evolve as the green finance industry evolves.

Isaacs-Lowe said that this model is “more inclusive” than a top-down approach, enabling Moody’s to adopt a “broad” sustainability focus and be more innovative in its development of green products and services.

In regard to the company’s own environmental footprint, the need for greater disclosure as a result of TCFD alignment has led to Moody’s pledging to reduce its own greenhouse gas (GHG) emissions, electricity use and natural gas use year-on-year against a 2017 baseline.

The firm reduced its Scope 1 and 2 emissions by 9% last year despite a 7% increase in its physical footprint. However, 2017 marked a 20% increase in Moody’s Corporation’s Scope 3 emissions as the firm’s client and employee bases expanded.

In a bid to address its Scope 3 emissions, as well as other material challenges such as resource efficiency in its offices, Isaacs-Lowe explained that Moody’s has formed a dedicated “environmental taskforce” team to crowdsource ideas on how it can operate more sustainably from its employees. Once ideas are sourced, the company’s CSR team can then analyse how much of a material impact each potential change would have on the company’s environmental footprint.

This method has already led to a ban on single-use straws, disposable coffee cups and plastic cutlery in several staff canteens. Additionally, employees told Moody’s they would like their employer to increase its carbon footprint monitoring and become more proactive at minimising its GHG emissions. To meet this goal, Moody’s will launch a commuter survey by early 2019 in a bid to better understand the travel habits of its staff, and how it can incentivise more sustainable travel among its employees.

“Moody’s is relatively small in the context of a multinational company – we only have about 12,000 employees and we do not own our buildings,” Isaacs-Lowe said. “While there are therefore some limitations in regards to what we can do from an environmental perspective, we know that we can do better than we have done in the past and we are increasingly focusing on that.”

Offering her advice to other sustainability professionals who may be considering TCFD alignment, Isaacs-Lowe urged others to educate their teams on the benefits of refusing to “simply categorise metrics as good or bad” and “moving beyond” this perspective to champion greater transparency.

“It’s good to start with the baseline and look at what your metrics are before determining which aspects are important – or appropriate – to disclose,” she added.

Sarah George


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