The TCFD’s report card on climate change disclosure

Many companies report on environmental issues, but most have yet to specifically provide the market with consistent information on the financial implications of climate change for their businesses.

So says Michael R. Bloomberg, chair of the Task Force on Climate-related Financial Disclosures (TCFD), in a new status report. Released in October, the report examines the extent to which over 1,700 companies globally included information aligned with the core TCFD recommendations published in June 2017 in their own 2017 reports.

Its survey, which consisted of both an artificial intelligence review and disclosure practices review, found that most companies disclose some climate-related information aligned with at least one recommended disclosure, usually in sustainability reports. However, very few disclosed the financial impact of climate change on the company.

In addition, the information on strategy resilience under different climate-related scenarios, including a 2°C or lower scenario, was limited.

The survey also found that disclosures varied across industries and regions, with more companies in Europe disclosing information aligned with the TCFD’s recommendations than in other regions.

Further, disclosures were often made in multiple reports – for example, in financial filings, annual reports, and sustainability reports.

Disclosures also varied widely across industries. For example, more non-financial companies reported their climate-related metrics and targets than did financial companies. However, financial companies were more likely to disclose how they had embedded climate risk into overall risk management.

The report reveals that the number of companies supporting the TCFD recommendations has grown to over 500, compared with 100 when the recommendations were launched in June 2017.

‘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,’ observes Bloomberg.

The report contains excerpts from financial filings, annual reports and sustainability reports of companies such as Allianz, Westpac, ANZ, State Street, AXA group, BHP and Unilever, as well as analysts’ perspectives of their disclosures.

Over the next nine months, the task force will continue to promote and monitor adoption of its recommendations. It will prepare a second status report for the Financial Stability Board in mid-2019.

Meanwhile, in other climate change news, the Bank of England Prudential Regulation authority (PRA) and the Financial Conduct Authority (FCA) have started working closely together to develop a joined-up approach to enhance the resilience of the UK financial system to climate change.

The PRA has issued a consultation paper on a draft supervisory statement on banks’ and insurers’ approaches to managing the financial risks from climate change. Similarly, the FCA has published a discussion paper outlining its proposed approach to climate change and how the impacts of climate change are relevant to its statutory objectives of protecting consumers and market integrity, and promoting competition.

To co-ordinate action and share best practice, the PRA and FCA are also setting up a Climate Financial Risk Forum.

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