Climate risk: 1,000 global firms give backing to corporate disclosure guidelines

More than 1,000 corporates around the world worth a combined $12tr in market capitalisation have now signed up to support voluntary guidelines for disclosing the risks posed to their business by climate change and the net zero transition, the Task Force behind the initiative announced today.

Having first set out its voluntary guidelines in 2017, the Task Force on Climate-related Financial Disclosures (TCFDs) today said the number of financial institutions and businesses publicly signed up to its reporting recommendations continues to surge.

The Task Force, which is chaired by billionaire businessman and US Presidential hopeful Michael Bloomberg, provided a range of best practice recommendations to help markets better address the financial risks associated with climate change by ensuring better disclosure of corporates' environmental performance and climate strategies.

Specifically, the guidelines call on firms to report annually on climate-related risks and undertake scenario planning that informs investors how companies would respond to a range of different climate policy and decarbonisation pathways. 

The recommendations are designed to help minimise stranded assets risks by letting investors know how well prepared companies are for the net zero transition. However, there is also a growing body of work that suggests companies that report in line with the TCFD recommendations have a lower risk profile and perform better than their peers.

As such, the number of companies looking to comply with the guidelines is growing, as pressure from investors and the public for them to develop credible climate strategies continues to ratchet up. The latest update comes after the World Economic Forum last month ranking climate and environmental risks as the top five threats facing the global economy in 2020.

Bank of England Governor Mark Carney, who previously chaired the Financial Stability Board which set up the Task Force in 2015, said support for the TCFD guidelines had "skyrocketed", and called for more firms to commit to greater climate risk disclosure in support of the net zero transition.

"Only two years after the final TCFD recommendations were published, demand for climate-related financial disclosures has skyrocketed and the supply is responding," said Carney, who leaves the Bank of England next month to take up a new role supporting preparations for the COP26 climate summit in Glasgow later this year. "The TCFD is helping to bring climate risks and resilience into the heart of financial decision-making, making climate disclosure more comprehensive and comparable and helping investment for a two-degree world go mainstream. In this year of climate action, let's build on this momentum to improve the quality and quantity of disclosure and build a market in the transition to net zero."

In total 1,027 organisations headquartered in 55 countries around the world have signed up in support of the TCFDs to date, spanning both private and public sectors across a range of industries, according to the Task Force.

These include 473 financial firms responsible for assets of $138.8tr, as well as major banks, regulators, stock exchanges, credit ratings agencies and even national governments such as the UK, Belgium, France, Japan, Canada, Sweden and Chile, it said.

Mary Schapiro, head of the TCFD secretariat, hailed today's milestone as a clear indication that global organisations are now "accepting that climate risk is a financial risk".

"Today's announcement also underscores the significant investor demand for information that will help them mitigate potential risks and evaluate opportunities in the transition to the low carbon economy," she said.

However, a progress report released last year by the Task Force indicated that while climate risk disclosure is improving, take-up is still not happening nearly fast enough to guard against escalating risks and help shift the flow of finance towards building a greener economy.  

Hiro Mizuno, executive managing director and chief Investment officer of Japan's Government Pension Investment Fund (GPIF), which published its first TCFD-aligned report for its $1.6tr portfolio last year, said the TCFD disclosure framework was "mutually beneficial" for corporates seeking long-term capital and for investors to make informed decisions.

"As we began witnessing a massive shift of capital toward sustainability, with ESG investment becoming mainstream, it becomes increasingly critical for corporates to disclose climate-related risks and opportunities," he said. "It is necessary for all parties in our investment chain, from portfolio companies to asset managers, to support the TCFD so that asset owners like us can properly access our portfolio."

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• Topics
• Risk
• Investment
• Michael Bloomberg
• Mark Carney
• Financial Stability Board
• TCFD
• climate risk
• Task Force on Climate-Related Financial Disclosures
• climate disclosure