The impact of TCFD recommendations on corporate disclosure
To which extent has the adoption of the TCFD recommendations been reflected in supporters’ corporate disclosure?
Climate change is predominantly discussed by financial services companies through a risk lens – 54% of finserv TCFD supporters refer to the topic in relation to risk which could affect investors’ approach.
Interestingly, climate change has been primarily discussed in the context of distant future risks, rather than in recognizing the upcoming implications to business.
On the flip side of risk is opportunity. In contrast with our previous results, data in this case indicates that only 20% of companies see climate change issues as an opportunity. This shows that companies are more attuned to talking about risk than they are opportunity, even though they often appear hand-in-hand in reality.
Yet, in order to pick the winners and losers from the low-carbon transition, information on risk identification and management is insufficient; investors need to know which companies are positioned to ‘carpe diem’ in a rapidly, drastically changing environment.
When the TCFD recommendations were published in 2017, there was a notable shift in supporters’ disclosure on climate change, with significantly more companies in that group starting to mention the topic in their annual financial report.
The number of finserv TCFD supporters mentioning climate change with a high emphasis has more than doubled from 14% in 2016, the year before the TCFD recommendations were published, to 33% in 2019.
For finserv TCFD supporters, the arrival of the TCFD coincided with a rapid increase in narrative discussing greenhouse gases (GHG), from 63% before the recommendations were published to 75% in 2019.
However, GHG were mentioned with high emphasis at an average of 22% before the TCFD recommendations and are at 23% in 2019, which suggests that there’s still a lot more they can do.
The scope of the research
The study features 115 financial services companies as well as 194 non-financial services companies that are TCFD supporters. Additionally, the research covers 133 global financial services companies (market capitalization of over $20 billion) which are not TCFD supporters.
Using Datamaran’s proprietary artificial intelligence, our report compares the way finserv and non-finserv companies discuss the issues of climate change and greenhouse gases in their annual financial reports.
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.
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