More companies embrace climate risk disclosure than actually do it

Six in 10 of world's 100 biggest public companies want businesses to measure and disclose how possible climate outcomes could impact performance.

A task force set up to improve the reporting of financial risks caused by climate change has seen support for its recommendations soar in the past year as demand grew from investors for more information on how a warming planet will affect business. But disclosures by companies on the financial impact remain low, according to a new report from the Task Force on Climate-related Financial Disclosures.

The group has urged businesses to measure and disclose how different climate outcomes might weigh on their performance. TCFD’s annual report, published on Thursday, found that over the past year support for its transparency practices jumped by 85%. More than 1,500 organizations, with a combined market capitalization of $12.6 trillion, have embraced TCFD’s recommendations. That includes nearly 60% of the world’s 100 largest public companies.

Michael R. Bloomberg, the founder and majority shareholder of Bloomberg, the parent company of Bloomberg News, is the chair of TCFD. 

The group’s guidelines recommend companies disclose how climate issues have impacted company strategy, company greenhouse gas emissions, and consideration of climate issues for major expenditures, acquisitions and divestitures. So far, the report found, the energy industry and materials and buildings companies are the most compliant with TCFD’s guidelines.

While climate-related disclosures may have increased, reports on the potential financial impacts remain low. Many companies surveyed by the task force said they had concerns about potentially having to disclose confidential information and the lack of standardized metrics for their industries.

The coronavirus pandemic has reinforced calls for more sustainable approaches to financial markets as ESG funds showed more resistance to the shock than the market as a whole. Consultancies are now offering portfolio-wide climate-risk analysis to clients, with some investment managers developing their own in-house teams.

TCFD was set up in 2015 by the G20-backed Financial Stability Board and reported its initial recommendations two years later, setting out voluntary guidelines on governance, strategy, risk management and targets to enable companies to disclose material risks consistently to investors. The guidelines help companies identify, assess and communicate climate-related risks.