Companies increasing climate disclosure, but quality of information not yet useful for investors

The TCFD formed in 2015 and launched its recommendations in June 2017

The inaugural Disclosure Benchmark Review was published on Tuesday (29 November) by Manifest Climate. It reviewed the public filings of more than 3,000 companies in 65 countries based on their alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The report aims to showcase how “decision-useful” company reports are for stakeholders and investors that are trying to derisk portfolios and spending plans.

The review found that more companies are now producing climate-related disclosures, but that the usefulness of this information is still lacking.

It found that 66% of assessed companies disclose some sort of TCFD-aligned information, however, just 49% of the companies provided disclosures with “sufficient clarity, specificity, and comparability” to be useful for investors and stakeholders.

The analysis found that only 12% of companies have included information aligned with the TCFD Governance recommendations, while none of the companies provided disclosure that would be deem “decision-useful” across all the TCFD recommendations.

Manifest Climate’s chief executive Laura Zizzo said: “Our analysis supports the findings of the TCFD’s own 2022 Progress Report that TCFD disclosure is being adopted more widely across the globe. However, the clarity, specificity, consistency and comparability to make the disclosure decision-useful just isn’t there, even within financial services which is a relatively well-advanced sector for TCFD adoption.

“This is putting investors and the financial system at risk as investment and operational decisions are made without the required transparency and completeness of climate-related information being available.”

Transition plans

The review comes in the same month that the first draft of a new disclosure framework for forthcoming mandatory climate reporting from big businesses was issued.

The Transition Plan Taskforce (TPT) was launched by the Treasury this April, then-Chancellor Rishi Sunak used his platform at COP26 to pledge that large businesses in high-emission sectors would be subjected to new net-zero disclosure requirements from 2023. The requirement is around net-zero transition plans, which support long-term corporate emissions goals with interim milestones and outline the necessary steps to change business models and investment.

The TPT has now published its first proposal for a ‘gold standard’ for net-zero transition plans. It was asked to draw up such a standard to ensure that disclosures are meaningful, unified, and would deliver the emissions reductions they tout.

The proposal consists of a framework, recommending how companies should develop plans and the key elements they should include; and an implementation guidance document. The guidance includes advice on when, where and how to provide net-zero transition plans.

Edie Explains: TCFD for business

What are the TCFD recommendations? Why does climate disclosure matter? How do you access the financial impacts of climate change? And, what is scenario analysis? This free edie Explains guide gives you everything you need to know.

Click here to download the report.