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1,500 organizations back climate disclosure guidance: TCFD report

Highlights

85% increase in interest since 2019 report

Energy, materials companies leading on disclosure

Climate risk disclosure core component of energy transition

London — More than 1,500 organizations have expressed their support for climate risk disclosure recommendations since 2019, an international task force attached to global financial watchdog the Financial Stability Board said Oct. 29.

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The group's climate disclosure framework matters because it helps investors understand climate risk when allocating capital to companies and projects, with implications for the availability of finance to fund investments in carbon-intensive sectors.

"Nearly 60% of the world's 100 largest public companies support the TCFD, report in line with TCFD recommendations, or both," the Task Force on Climate Related Financial Disclosures said in its annual 2020 report.

The group's latest status report found that disclosure of climate-related financial information aligned with the TCFD's recommendations has increased steadily since its guidance was first published in 2017, although there is a continuing need for more progress, it said.

"On average across the TCFD recommendations, 42% of companies with a market capitalization greater than $10 billion disclosed at least some information in line with each individual TCFD recommendation in 2019," it said.

Energy companies are leading on climate disclosure at 40% participation, followed by materials and buildings companies at 30%, it said.

However, serving to highlight gaps in climate risk reporting, expert users of disclosure information said the impact of climate change on a company's business and strategy was the most useful information for financial decision-making, but only one in 15 companies was making this disclosure, the TCFD said.

"The more companies know about their risks and opportunities related to climate change, and the more information investors have, the better we'll be able to allocate resources and make progress -- so it's encouraging to see leaders in the public and private sector implementing the Task Force recommendations, as outlined in this report," TCFD chair Michael Bloomberg said in a statement Oct. 29.

The TCFD's work is designed to increase transparency to make financial markets more efficient, and economies more stable and resilient, by helping companies understand climate risk during the transition to a low-carbon economy.

The FSB launched the TCFD in 2015 amid concerns that climate change could have an impact on company valuations large enough to threaten the stability of the global financial system.

The FSB was set up by the G20 countries in the wake of the 2008-09 global financial crisis to monitor systemic risks and promote global financial security. It includes senior policymakers from ministries of finance, central banks and supervisory and regulatory authorities, and is chaired by US Federal Reserve governor Randal K. Quarles.

The FSB has also asked the TCFD to publish a further status report in September 2021 and undertake further analysis on the extent to which companies describe the financial impact of climate-related risks and opportunities on their businesses and strategies, it said.