TCFD gains 500 global supporters amid Covid-19, but full alignment remains rare

The Task Force on Climate-related Financial Disclosures (TCFD) has revealed that more than 500 organisations have pledged support for its recommendations since February, but that reporting remains inconsistent.

The framework aims to help businesses minimise physical and transition risks 

The framework aims to help businesses minimise physical and transition risks 

In its latest annual status report, published on Thursday (29 October), the body reveals that verbal commitments to support its recommendations have skyrocketed by 85% within a year. Some 1,500 organisations, including banks, pension funds, reinsurers, end-user businesses and government departments have vowed to implement the framework.

In the private sector, 60% of the world’s largest 100 companies have now made TCFD-related commitments on measuring, disclosing and responding to climate risk.

But, as with all annual status reports to date, the TCFD’s research reveals gaps between ambition and action. It used AI to analyse the reports of all supporting bodies, finding that the quality of reporting has increased by an average of just 6% since 2017. The sharpest improvement in reporting quality was measured among the energy, materials and built environment sectors.

Progress on scenario analysis, in particular, “remains low”, the report notes. Scenario analysis is designed to help organisations measure the potential financial impact of climate change on their operations, strategies and supply chains at a range of warming trajectories – including the ‘well-below’ 2C Paris Agreement scenario. Only one in fifteen firms supporting the TCFD has completed scenario analysis at the strategy level.

In a drive to improve reporting quality and support scenario analysis processes, the report provides an illustrative ‘roadmap’ on collecting information relating to climate risk and embedding it in decision-making processes.  

“Companies already disclosing their governance and risk management processes for climate-related issues and working toward full TCFD implementation might consider expert users’ relative ranking of specific types of climate-related information — from most useful to least useful — as one factor to consider in prioritizing their efforts,” the report states. The roadmap is informed by case studies from the asset owner, asset manager and risk management spaces.

“The work that governments and businesses are doing to address the devastation caused by the coronavirus is also an opportunity to build a stronger, more resilient, and more sustainable economy – and transparency and disclosure have an important role to play,” TCFD chair Michael R Bloomberg said. “The more companies know about their risks and opportunities related to climate change, and the more information investors have, the better we’ll be able to allocate resources and make progress – so it’s encouraging to see leaders in the public and private sector implementing the Task Force recommendations, as outlined in this report.”

Sustainability Accounting Standards Board

In related news, BlackRock has this week published an update on its work to improve TCFD uptake and reporting in line with the Sustainability Accounting Standards Board’s (SASB) standards.

Back in January, BlackRock’s stewardship team asked all companies which are held in thematic or general funds to publish reports aligning with both of these frameworks. The SASB standard contains measures to help companies assess the environmental issues that are most material to their business and to quantify long-term risks in these fields as financial.

Q3 saw a fourfold increase in SASB-aligned disclosures among on a year-on-year basis.

Moreover, BlackRock Investment Stewardship held 21% more engagement activities on ESG in the third quarter of 2020 than in the same period during 2019. Governance issues were the most commonly discussed, but other topics ranged from board diversity, to the skills pipeline, to executive pay, to environmental issues. 

“However, one of the top challenges to greater adoption we hear from the directors and leadership teams is the confusion caused by the various frameworks or standards,” BlackRock said in a statement.

Sarah George



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