Momentum builds for climate-related disclosures

A new report that assesses companies based on their climate-related disclosures reveals some positive results, despite such disclosures being relatively new.

The report, published by the task force on climate-related financial disclosures (TCFD), provides an overview of how well companies’ 2017 financial reports align with the task force’s core recommendations published in June 2017. (The Financial Stability Board, a global coordinator of financial authorities, established the TCFD in 2015.)

Those recommendations support climate-related disclosure by focusing on themes of governance, strategy, risk management, and metrics and targets.

The task force found that a majority of the 1,700 companies it assessed made disclosures that aligned with one or more of its recommendations.

However, few firms disclosed the financial impact of climate change, says the report, and disclosures varied widely across industries.

For example, more non-financial companies reported climate-related metrics and targets than did financial companies, yet the latter were more likely to disclose how they’d embedded climate risk into overall risk management.

The report further found that disclosures were often relegated to sustainability reports or else spread across financial filings, and annual and sustainability reports.

Regionally, Europe had the highest percentage of companies with climate-related disclosures.

Though the report indicates more work needs to be done, the number of firms supporting the recommendations has grown, reaching 500—up from 100 when the recommendations were first launched. These firms represent almost US$8 trillion in market capitalization, including financial firms responsible for almost US$100 trillion in assets, says a release.

The Financial Stability Board has asked the TCFD to publish a further status report in June 2019 that will analyze disclosures in 2018 financial reports.

For more details, read the full TCFD report.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.