TCFD: Most companies now reporting climate risk in some way

Almost six in ten (57%) of the world’s listed companies are now reporting climate risk in line with five or more topics recommended by the Taskforce on Climate-Related Financial Disclosures (TCFD).

TCFD: Most companies now reporting climate risk in some way

This is up from less than one in five of these companies (18%) in 2020. The statistic is a headline figure from the Taskforce’s latest annual status report.

The TCFD has tracked a 26% increase, between the 2020 and 2022 fiscal years, in the number of listed first reporting on their climate-related risks and opportunities.

It has also recorded a 24% increase in the number of firms with public climate targets and a 25% uptick in the number of companies explaining how their board members have oversight of climate-related strategizing and delivery.

Disclosures have increased particularly significantly in the energy, insurance and materials and buildings sectors. At the other end of the spectrum, uptake has been more limited in the technology, media and consumer goods sectors.

The average listed company is now reporting in line with 5.3 of the 11 components of the TCFD’s framework.

TCFD chair Michael Bloomberg said it is “clear that [the TCFD has] made tremendous strides in bringing greater transparency to financial markets for both climate-related risks and opportunities.”

As well as assessing listed companies, the status report assesses disclosures from finance giants. It reveals that around half of the biggest asset owners in the world, plus eight in ten of the largest asset managers, are now reporting in line with at least one TCFD recommendation. For reporting in line with at least five recommendations, the proportion stands at 36% for asset owners and 69% for asset managers.

Remaining challenges

It bears noting that only 4% of the 1,000+ listed companies assessed by the TCFD are reporting in line with all 11 topics. The TCFD has, since its inception, recorded fairly slow improvements in reporting quality, even as quantity increases significantly.

A particular remaining challenge is getting businesses to assess the likely resilience of their operations and value chains in a range of global warming trajectories, a facet of the TCFD known as scenario analysis. A TCFD-led survey of some 200 companies found that 90% believe undertaking scenario analysis is “somewhat difficult” or “very difficult”.

It was also confirmed that most corporates are not including their TCFD-aligned disclosures in their financial filings, despite the TCFD advocating for this approach. Last year, most companies included their TCFD information in their sustainability report or their general annual reporting.

TCFD-aligned reporting remains voluntary in most markets, aside from the UK, where aligned disclosures have been mandatory for larger firms since April 2022. The rest of the G7 have pledged to follow the UK’s lead and other nations supporting a TCFD mandate for the future include New Zealand and Switzerland.

ISSB takeover

The report will be the last of its kind from the TCFD, as the International Sustainability Standards Board (ISSB) is set to take over its monitoring and responsibilities next year.

The ISSB was first proposed by the not-for-profit International Financial Reporting Standards Foundation (IFRS Foundation) in early 2021, and launched later that year. Its aim is to unify disclosures from corporates, helping investors and other stakeholders to properly compare their sustainability performance and related risks.

Earlier this year, the he ISSB issued its first two finalised frameworks, with an expectation that the first corporate reports aligned with them will be published in 2025. The two new standards – IFRS S1 and S1 – are climate-focused, but the former also covers other related environmental risks and opportunities.

The TCFD’s new status report urges standards bodies, regulators, businesses and financial sector players to build on its work to date even after the ISSB takeover.

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