I want to be a part of it: meeting the Nasdaq, ERM and Datamaran community at Climate Week
7 October 2019 - By Saskia Ligteringen
Visiting New York, it’s difficult not to get Frank Sinatra’s words in your head. In fact, they’d reached a crescendo as we arrived among the billboards and highrises of Liberty Plaza for Making Sense of TCFD / Purpose, Disclosure, and Leadership, our workshop with Nasdaq and ERM for this year’s Climate Week. But I never quite realized how apt Sinatra’s words would be.We’re all connected these days, but nothing makes you feel more a part of something than being physically surrounded by your community. Meeting so many of our colleagues, clients and friends was the perfect opportunity to get the general feeling about the way companies are integrating ESG issues, and how the TCFD gives them the opportunity to comprehensively disclose. Three points struck us in particular.
We’re now forward-looking
“I’ll make a brand new start of it,” goes the song. The introduction of the TCFD gave us the chance to do just that.
After encountering difficulties, the first instinct is often to look at what you could have done differently. Maybe it’s human nature. Until recently, this was certainly the case when it came to ESG issues. And then along came the TCFD recommendations.
From what our community’s saying, Europe’s more advanced on this than the US. European investors are putting pressure on US companies to align company strategy with the Paris agreement. Designed to bring about consistent and useful information on the material impacts of climate-related risks and opportunities, the TCFD has pushed the conversation from being backward-looking to forward-looking.
Companies are now asking for things like scenario analysis, the process of analyzing possible future events by considering the different possible outcomes; topics such as catastrophic events and new regulations. Organizations are no longer waiting for the future to get them.
The rise of investor relations
“I want to wake up in a city that never sleeps and find I’m a number one, top of the list.” Since the introduction of the TCFD, investor relations professionals have become a crucial part of the process. More of our clients are giving ESG analysis to their IR teams – something that Nasdaq are experiencing right now. IR officers are experiencing a huge increase in questions on ESG issues since the launch of the TCFD.
Why is it about investors? In order to get people to understand the significance of ESG issues, we’ve had to frame them in the financial. Something takes on a new importance when it’s expressed in terms of its financial effect on you. It wasn’t until businesses started to understand the financial impact of climate change on their operations that they could suddenly start to understand the threat.
In the same way, investors need to know where their money’s going. IR professionals who can manage those relationships will certainly find themselves “king of the hill.” There are success stories behind the scenes – but they need to be published and talked about more, not only for a company’s reputation, but also so there’s more benchmarking.
Evan Harvey, Global Head of Sustainability at Nasdaq, sees strength in the TCFD focus: “By concentrating on one issue, the TCFD forces corporate leaders to confront the implications of climate change in depth. ESG covers so many topics. By homing in on one — and turning it into a more disciplined financial reporting exercise — TCFD helps organizations better comprehend its multifaceted impact. It makes an abstract concept more real and tangible, requiring urgent action.”
The move to the mainstream
“Start spreading the news,” the song begins. Although it might seem unpalatable to those of us who consider ourselves a little ‘alternative,’ becoming part of the mainstream is absolutely key – for all those who are keen to raise awareness of ESG issues.
Previously, investors wouldn’t invest because they had no ESG expertise. ESG datasets were not used to inform decision-making. But as these issues become more mainstream, we suddenly have lots of experts. And through platforms like Datamaran, we now have the means with which to monitor and use these insights. The TCFD recommendations are now landing on risk managers, helping to push the conversation on how non-financial issues will affect the bottom line and the legal context.
“Shared responsibility requires shared action,” says Evan Harvey. “Because climate change crosses so many boundaries, companies are struggling to understand their role in adaptation, resilience, and transition. New tools like Datamaran leverage technology to make sense of the data and empower companies to outperform.”
As ESG issues become more prominent, investors and customers are pushing for companies to be more proactive on climate risk. One of the key takeaways from the discussion was that employees are increasingly important stakeholders who are asking lots of questions about companies’ climate activities and pushing for greener business practices. For it to catch on, however, it needs a mandate. As the TCFD starts to become law in various countries, that mandate is starting to become apparent.
There’s a feeling out there that there’ll be a huge uptake of the TCFD in the coming years, and that the scenario analysis will be the most complex part. It’s another thing for organizations to get to grips with. The next challenge.To our co-organizers: Evan Harvey, Global Head of Sustainability at Nasdaq and Mike Wallace, Partner at Brownflynn, to our co-speaker, Sandy Nessing Corporate Sustainability Director at AEP, and to our attendees – in fact, to all of our global community – a big thank you. It comes down to us as a community to keep talking and finding ways to make a difference. Or in other words, “It’s up to you, New York, New York.”
TCFD: An update on corporate disclosure following the second status report
In June 2019, the TCFD released its second status report, indicating increased adoption of its recommendations.
To coincide with its release, we are updating our previous analysis into the extent to which this adoption has been reflected in supporters’ corporate disclosure.
The analysis shows that, whether they’re supporters or non-supporters of the TCFD, companies are now talking about climate change more than ever before. More in detail, climate change is predominantly discussed through a risk rather than an opportunity lense – with 54% of FinServ TCFD supporters referring to the topic in relation to risk and 20% in relation to opportunity in 2018.
To read the full report, please fill in the form on the right.