Category: CDSB

Are we heading towards mandatory climate disclosures?

Are we heading towards mandatory climate disclosures?

By Laura Canevari

This month, CDP and CDSB held jointly a webinar to discuss the development of disclosures and accounting in line with the TCFD Recommendations. The emerging regulatory approaches of countries, which promote climate-related financial disclosures, were also showcased.

Jeenie Gleed of CDP, reminded the audience that the TCFD recommendations can be the bedrock on which to support the implementation of Article 2.1 C of the Paris Agreement. As noted by the Overseas Development Institute (ODI) late last year, the TCFD recommendations are one among a number of information instruments paving the way towards the implementation of Article 2.1 C, which stipulates that Parties to the Agreement commit to ‘making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development’. Other information instruments include, for example, national initiatives such as China’s Green Finance Committee, Japan’s non-binding green bond guidelines, and the development of ISO 14097 for reporting on financing activities relation to climate change.

According to ODI, G20 countries have started to implement the TCFD recommendations through one or more of the following mechanisms: political and regulatory engagement; formal engagement with the private sector via the publication of guidelines and action plans; or encoding law. The table below offers a summary developed by the Cambridge Institute for Sustainable Leadership (CISL) on the level and type of implementation in G20 countries, where it can be noted that approximately two thirds of G20 members have engaged with the TCFD Recommendations, though this is primarily in the form of statements of support.

CDP and CDSB offered a closer look into the ways through which some of these countries and the EU are integrating the TCFD recommendations into the current legislative frameworks. They highlighted that a lot can be achieved through minor amendments of existing regulations and laws. Accounts of France and the UK were given, with well known examples regarding France’s Article 173 of the Energy Transition and Green Growth Law, for example.

Less well known examples were also given from Canada, where the government has released guidelines supporting the Canadian Business Corporation Act, such as:

  • NI 51-102 Continuous disclosure obligations;
  • NI 58-101 Disclosure of corporate governance practices; and
  • CSA Staff notice 51-333 Environmental reporting guidance, to incorporate TCFD recommendations.
  • More importantly, Canada has also released a notice on Reporting of climate change related risks (CSA Staff notice 51-358) and similar to the UK, they established an expert panel on sustainable finance, incorporating climate change considerations.

At the EU level, discussion focused on the non-financial reporting directive providing the basis of engagement with TCFD, along with EU Guidelines on reporting climate related information, and the EFRAG Project task force on climate related reporting. In particular, Art. 19 and 29 of NFR Directive (2014/95/EU) and article 20 of directive 2013/34/EU are specifically designed to align to the TCFD recommendations.

Summaries on how other jurisdictions are incorporating TCFD can be found by clicking here, and include the United States, Australia, New Zealand and Chile.

Overall the analysis showed that it is not a matter of if, but of when and who. Steps are being taken to incorporate the TCFD recommendations, with implementation gaining significant traction among central banks, regulators and supervisors. The analysis emphasised that change is occurring through small amendments and enforcement of existing regulatory frameworks.

The TCFD Recommendations are already spurring on much more than voluntary action. Regulators and supervisors are in the process of understanding what the market can take in terms of the release of mandatory disclosure measures. They have started evaluating, through voluntary measures and guidelines, what financial services and corporate actors can commit to in their disclosures. More can be expected to happen as other countries join this global effort, and as supervisors and regulators get a clearer sense of what needs to be included in mandatory processes.

Cover photo by Denys Nevozhai on Unsplash.