For more than 20 years, large companies have been ramping up the depth and breadth of their disclosure on GHG emissions. At the same time, the amount of forward-looking financial information on climate risks and the opportunities being provided to investors has been patchy at best.
But in the short time since July 2017, following the release of the Task Force on Climate Related Disclosure (TCFD) guidelines, more than 500 large businesses, investors and industry groups have signed on to provide this type of forward-looking financial disclosure. Companies in the financial services industry are leading the way in their support of the TCFD recommendations, including BlackRock, State Street and S&P Global, along with the Association of Chartered Certified Accountants.
It’s not limited to the financial services industry. Other sectors are signing on, including Statoil and Shell in the energy sector, consumer product companies such as H&M and Nestlé, materials companies such as BASF and DowDuPont, as well as industrial companies such as Saint-Gobain and Ingersoll Rand.
The moment for improved financial disclosure on climate has arrived.
As companies begin to address the TCFD guidelines and make disclosures in line with the recommendations, common challenges and questions are emerging.One concern is how to incorporate climate change into existing operational decision-making processes and standard business functions. For example, how should climate be included in reports to the board and in company financial reports? Product innovation pipelines need to consider how urgently companies should invest in creating different products and services that capture climate-related opportunities or reduce risks from policies that will cut demand for energy intensive products. Many companies have risk-management processes that address business continuity in the event of a severe storm, but the wider range of longer-term climate risks is not generally part of the analysis.