How are companies managing their climate disclosures?

Professional services firm EY has produced a report on global climate risk disclosures that looks across sectors at how businesses are performing in managing their climate-related risks.

In June 2017, the TCFD (Taskforce on Climate Related Financial Disclosures), set up by the Financial Stability Board (FSB), finalised its recommendations on climate-related financial disclosures. EY’s report provides a global snapshot on the uptake of the recommendations across 18 markets, 11 key sectors and over 500 companies in the 2017–18 reporting period.

Report highlights are as follows:

• Most companies are lacking high-quality disclosures aligned to the TCFD recommendations. While two out of three companies have started to disclose climate-related risks, the quality of these disclosures is generally poor.
• The quality of climate change disclosures varies significantly across different markets, with the best-performing markets generally having some level of regulation or government support for the TCFD recommendations. Interestingly, the US scored highly despite a lack of coordinated economy-wide policy directives.
• Physical risk closures fall behind transition risk. Most disclosures related to the monitoring and management of an entity’s own emissions. Many companies also identified transition risks that either directly impact their sector or the supply chains they rely on.
• Content and sources of disclosures have not yet been incorporated within ‘financial filings’. Despite the TCFD recommendation that disclosures be made in financial filings, this is rarely implemented.
   

The full report can be found on the EY website.

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