By Robin Hamaker-Taylor
The Task Force on Climate-related Financial Disclosures (TCFD), has issued a new status report, available here. The report provides an overview of current disclosure practices as they relate to the Task Force’s recommendations, highlights key challenges associated with implementing the recommendations, and outlines the efforts the Task Force will undertake in coming months to help address some of the implementation challenges.
Using artificial intelligence technology to screen reports for over 1,100 large companies from 142 countries in multiple sectors over a three-year period, the analysis was augmented by a survey to assess companies’ efforts to implement the TCFD recommendations as well as users’ views on the usefulness of disclosures. Unsurprisingly, the demand for decision-useful, climate-related financial information by financial institutions, especially investors, has continued to grow. Among the potential drivers for this demand are regulators’ sustained and growing interest in climate disclosures. Growing interest from central banks, regulators and supervisors are reflected in the recommendations provided in the newly released Network for Greening the Financial System (NGFS), which calls for the development of robust and internationally consistent climate and environment-related disclosures and which “encourages all companies issuing public debt or equity as well as financial sector institutions to disclose in line with the TCFD recommendations.”
The results of the review are encouraging and survey results suggest that progress is underway; but much work still remains. Companies and financial institutions have started to report climate-related information in their annual reports and sustainability reports and recognize the materiality of climate related financial risks. However, many organisations have highlighted the challenges of implementing the recommendations, in particular the lack of standardized industry metrics and concerns about confidentiality of information. There are also still several key ways through which companies could still improve in their disclosures. First, the Task Force found that not enough companies are disclosing decision-useful climate-related financial information. The review also indicates that more clarity is needed on the potential financial impact of climate-related issues on companies and that disclosures relating to resilience is often left out of climate-related risk strategies.
The status report indicates that further support in the implementation of the recommendations is needed. To that end, the Task Force plans to prepare another status report for the Financial Stability Board in September 2020, following a continued period of support and monitoring recommendation uptake. In addition, the Task Force is considering additional work in the following areas:
- Clarifying elements of the Task Force’s supplemental guidance contained in the annex to its 2017 report (Implementing the Recommendations of the TCFD),
- Developing process guidance around how to introduce and conduct climate-related scenario analysis, and
- Identifying business-relevant and accessible climate-related scenarios.