Support grows for climate-related financial disclosures

30th October 2020


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Author

Robert Skinner

There has been an 85% rise in the number of organisations that have expressed support for the Task Force on Climate-related Financial Disclosures (TCFD) over the last year.

More than 1,500 organisations – including financial firms managing nearly $150trn (£116trn) in assets – have now backed the TCFD's recommendations, which were designed to provide investors with information on companies' exposure to climate change.

The task force's 2020 Status Report also shows that 42% of firms with a market capitalisation greater than $10bn disclosed at least some information in line with each TCFD recommendation last year.

Moreover, nearly 60% of the world's 100 largest public companies support the TCFD, report in line with its recommendations, or both.

Michael Bloomberg, chair of the task force and founder of Bloomberg, said that COVID-19 must be seen as an opportunity to build a more sustainable economy, and that “transparency and disclosure have an important role to play“.

“The more companies know about their risks and opportunities related to climate change, and the more information investors have, the better we'll be able to allocate resources and make progress,“ he continued. “So it's encouraging to see leaders in the public and private sector implementing the recommendations.“

The findings – derived through analysis of 1, 700 company reports using artificial intelligence – also show that firms most exposed to climate risks are more likely to report this information, with an average level of TCFD-aligned disclosures of 40% for energy companies, and 30% for materials and buildings firms.

However, despite progress, the report highlights the continuing need to improve levels of TCFD-aligned disclosures, with information on the potential financial impact of climate change on companies' businesses and strategies remaining low.

In response, the task force has issued two guidance documents, one on climate-related scenario analysis, and the other on integrating climate-related risks into existing risk management processes and disclosing those processes.

In addition, the TCFD has launched a 90-day consultation to gather feedback on potential metrics for the financial sector, ending on 27 January 2021.

Randal Quarles, chair of the Financial Stability Board, said that the latest report shows “significant momentum around adoption of and support for the TCFD's recommendations, while also highlighting and making proposals to address challenges to more consistent and robust implementation“.

Image credit: iStock

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