Category: fsb

First-ever TCFD summit calls for an acceleration of climate-related corporate disclosures

First-ever TCFD summit calls for an acceleration of climate-related corporate disclosures

By Anna Haworth

Last week saw the first-ever global TCFD Summit take place in Japan, with over 300 attendees gathering to review progress in the implementation of the TCFD recommendations and explore emerging best practice in climate-related financial disclosure.

Mark Carney – the Governor of the Bank of England and Chair of the Financial Stability Board (FSB) – gave one of the keynote speeches at the event and had some strong and urgent messages to share:

“To bring climate risks and resilience into the heart of financial decision-making, climate disclosure must become comprehensive, climate risk management must be transformed, and investing for a two-degree world must go mainstream.” 

In his speech, Carney took stock of the progress made to date since the final TCFD recommendations were published, and the path ahead for improving reporting and risk management. The main messages under each of these two themes are summarised below.

Progress so far

  • Echoing the 2019 TCFD status report, Carney highlighted the fact that the demand for TCFD disclosure is enormous (supporters control balance sheets totalling USD 120 trillion), and the supply of disclosure is responding, with four-fifths of the top 1100 G20 companies now disclosing in line with some or all of the TCFD recommendations. The level of sophistication of disclosures has also increased, with companies, financial firms and policymakers increasingly recognising that disclosures “must go beyond the static to the strategic.”
  • Progress had been made by many of the largest banks and energy companies to harmonise how they report their risks, however Carney noted that “progress in both quantity and quality is uneven across sectors.”
    • Banks have begun considering the most immediate physical risks to their business models –from the exposure of mortgage books to flood risk and the impact of extreme weather events on sovereign risk.
    • The PRA’s survey of UK banks last year found that almost three quarters are starting to treat the risks from climate change like other financial risks, rather than viewing them simply as a corporate social responsibility issue.

Path ahead

  • Markets need information to assess which companies are strategically resilient to physical and transition climate-related risks.
  • Over the next few years, companies, banks, insurers and investors must:
    • Increase the quantity and quality of disclosures by sharing best practice
    • Refine disclosure metrics to determine which ones are most decision-useful
    • Spread knowledge on how to assess strategic resilience to manage risks and realise opportunities
    • Consider how to disclose the extent to which portfolios are ready for the transition to net zero.
  • The next two reporting periods (i.e. 2 years) are seen as critical for corporations to reach a definitive view of what counts as a high quality disclosure before they become mandatory. Carney makes reference to multi-sector TCFD summits and more focused TCFD industry preparer forums as key opportunities for companies to continue to share knowledge on how, what and where they disclose.

As Carney notes “growing physical risks will prompt reassessments of the values of virtually every financial asset.” However, there are clear benefits for companies to take action to build climate resilience. Research by the Bank of England and PwC finds a positive correlation between companies’ stock price and the number of TCFD disclosures that firms make. This could be because investors reward companies that are leaders in managing climate-related risks or simply because TCFD adoption identifies companies that are more naturally disposed to longer-term strategic thinking and planning.

Furthermore, TCFD disclosure is increasingly a responsibility, as suggested by research from the Commonwealth Climate and Law Initiative that concludes that non-disclosure is a bigger liability risk than disclosure. Further research supports this claim as well. As Carney states “that is just one reason why jurisdictions like the UK and EU have signalled their intentions to make TCFD disclosure mandatory.”

Acclimatise is at the forefront of developing methodologies and metrics that help corporates and financial services organisations to identify, quantify, and disclose physical climate risks and opportunities. We offer a range of specialist tools developed specifically to support TCFD-related disclosures. From portfolio wide to deep-dive analyses of physical climate risks and opportunities, Acclimatise can provide your organisation with a comprehensive solution across all four core element of the TCFD recommendations, namely governance, strategy, risk management, and metrics and targets. We have been applying scientifically robust scenarios to our projects for over 15 years. We now apply this vast experience to our TCFD work, for the benefit of our major corporate and financial service customers. If you would like to discuss your needs, our disclosure experts Laura Canevari and Robin Hamaker-Taylor would be delighted to hear from you.

Mark Carney’s full speech from 8 October 2019 is available here

Cover photo by Louie Martinez on Unsplash.
Acclimatise becomes an official signatory of TCFD

Acclimatise becomes an official signatory of TCFD

Acclimatise today became an official signatory of the Financial Sustainability Board’s (FSB) Taskforce on Climate-Related Financial Disclosure (TCFD). The initiative, established by Mark Carney and Michael Bloomberg, has been central in providing momentum for climate change action in the financial services industry.

Acclimatise has worked with UNEP FI and the world’s leading banks to help consider how they might implement the TCFD recommendations. Through its work, Acclimatise has helped develop methodologies for assessing physical climate risk to loan portfolios and is a leading advisor on climate risk and opportunity to the financial services industry.

The company’s supporting statement under the TCFD reads:

“Aligning strategies to stabilise our financial and climatic systems is vital. Corporate and financial institutions have a significant role to play in this. The incorporation of TCFD recommendations in their governance systems and decision-making processes is in fact key if we are to ensure a sustainable and climate compatible future, particularly in light of unmet governmental climate targets. We are proud to support this initiative and we will continue to excel at developing methodologies and metrics to help corporates and financial services organisations to identify, quantify, and disclose physical climate risks and opportunities.”

For more information about Acclimatise’s work on climate risk and financial services click here.

Image: World Economic Forum: Mark Carney, Governor of the Bank of England. World Economic Forum, Davos, Switzerland. CC by 2.0.