climate change / leolintang

With the International Sustainability Standards Board (ISSB) poised to take over as the global standards setter for climate disclosures, the Task Force on Climate-related Financial Disclosures (TCFD) published its final report documenting voluntary progress toward improved disclosure.

The TCFD reported that, while there has been some headway made toward useful climate reporting, just 4% of public companies now provide disclosure that is fully aligned with all 11 of its recommendations.

The report also detailed some meaningful progress.

For example, in 2020 the organization found that 18% of companies were reporting in line with five of the TCFD’s 11 recommendations; this year, that’s increased to 58%.

Additionally, the TCFD found that the percentage of companies reporting on climate-related risks or opportunities, board oversight and climate-related targets “increased significantly” between 2020 and 2022, jumping by 26, 25, and 24 percentage points, respectively.

Despite the signs of improvement, “more needs to be done,” said TCFD chair Michael Bloomberg in the report. “[A]lthough companies continue to make progress in their disclosures, significant gaps in data remain.”

“In particular, reporting the impact of climate change on companies’ businesses, strategies and financial planning is still lagging behind,” he said.

On the investor side, the report said almost 70% of the world’s top 50 asset managers, and 36% of the top 50 asset owners, provide disclosure that meets at least five of the task force’s 11 recommendations.

The TCFD said investors pointed to a lack of information from companies as the primary obstacle to meeting its recommendations in their own disclosures.

“With global temperatures continuing to rise in the near term — leading to larger extreme events — the task force emphasizes the importance of companies considering the impact of climate change and associated mitigation and adaptation efforts on their strategies and operations and disclosing related material information, including in their financial statements,” it said.

This kind of information “is critical for investors, lenders and insurance underwriters to appropriately assess and price climate-related risks and opportunities and allocate capital,” it said.

Alongside the TCFD’s final progress report, the Financial Stability Board (FSB) published its annual report on climate-related disclosures, noting that the publication of the ISSB’s final standards earlier this year was central to the “significant” progress on climate disclosures that it observed over the last year.

The FSB said it will work with the ISSB, the International Organization of Securities Commissions and other global standards setters to “promote the timely and wide use of the standards.”

It also pointed to the development of a global assurance, ethics and independence framework for sustainability disclosures as a key step.

“Compliance with, and enforcement of, high-quality sustainability assurance requirements could serve to deter greenwashing,” it said.

The FSB report also noted that all of its members have either requirements, guidance or proposals in place to establish climate-related disclosures.

Looking ahead, the FSB said it has asked the ISSB to monitor the state of climate disclosures.