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October 13, 2023

More progress needed on companies’ climate disclosures, says TCFD

Close-up of wind turbine
The TCFD has 11 disclosure recommendations for companies wishing to implement climate-related risks and opportunities through their reporting processes (Photo: Biletskiy/Envato)

The task force’s final status report highlights the challenges companies are facing when disclosing climate-related financial information

Companies are four times more likely to disclose climate-related financial information in their sustainability or annual reports than in their financial filings, according to a study by the Task Force on Climate-related Financial Disclosures.

However, the ratio has improved over the three years that were reviewed by the TCFD. At the beginning of the period, in 2020, companies were eight times more likely to share such information elsewhere other than in financial reports.

This is the sixth and final status report of the task force, which was created in 2015 by the Financial Stability Board, the global financial system watchdog.

The TCFD created 11 disclosure recommendations for companies wishing to measure climate risks and opportunities through their existing reporting processes. It found that between 2020 and 2022, over half of companies disclosed in line with at least five of its 11 recommendations, but only 4 per cent showed alignment with all.

The least reported of its recommended disclosures was the resilience of companies’ strategies under different climate scenarios. For the fiscal year 2022, just 11 per cent of the roughly 3,100 companies surveyed reported on this metric. 

According to a survey of 200 companies conducted by the TCFD ahead of its final report, 90 per cent of those respondents found this disclosure particularly difficult to implement.

“Rising global temperatures contribute to significant losses [through] extreme weather events. In 2022, natural disasters resulted in global economic losses of $284bn, of which less than half — $125bn — were covered by insurance,” the report states.

TCFD chair Michael Bloomberg said in a statement that while progress has been made, more should be done to “fully integrate climate data into the global economy and spur more private investment in clean energy”.

The UK has mandated the use of the TCFD disclosures for UK companies. The task force’s framework is also being considered by the International Sustainability Standards Board as it develops its reporting rules. From 2024, the ISSB will assume responsibility of monitoring climate-related disclosures and reporting to the FSB.

A service from the Financial Times