TCFD: ‘More progress needed’ on climate disclosures

Further work is needed to align business’ climate reporting with the recommendations set out by the Taskforce for Climate-Related Disclosures’ (TCFD) recommendations, the body has said.

According to the sixth and final status report published by the standard-setting body on Thursday 12^th October, On average for fiscal year 2022, companies reported in line with 5.3 of the Task Force’s 11 recommended disclosures, up from an average of 3.2 in 2020.

But while levels are increasing, they still fall short of the full set of recommended disclosures, with just 4% of companies submitting disclosures in line with all 11.

The report also found that disclosures of climate-related financial information is limited. On average for fiscal year 2022, information aligned with the 11 recommended disclosures was four times more likely to be disclosed in sustainability and annual reports than in financial filings.

However, the outlook for the TCFD recommendations is positive, with 97 of the 100 largest companies in the world having either declared support for them or already produced reports in line with them.

“This final report makes clear that we’ve made tremendous strides in bringing greater transparency to financial markets for both climate related-risks and opportunities,” said Michael R. Bloomberg, chair of the TaskForce and founder of Bloomberg L.P. and Bloomberg Philanthropies.

“While there is still much more work to do, this progress provides the forward momentum necessary to more fully integrate climate data into the global economy and spur more private investment in clean energy.”

Similarly, Mary Schapiro, head of the TCFD secretariat and vice chair for global public policy at Bloomberg L.P, argued that the TCFD has “helped to drive immense progress on climate-related financial disclosures”.

“It has been an honor to lead this work and I am proud to cap off a remarkable eight years with today’s report and look forward to continued efforts to further progress on transparency, particularly in support of the development of net-zero transition plans.”

The future of sustainability reporting

The TCFD was established by the Financial Stability Board (FSB) in 2015 with a view to developing “voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to lenders, insurers, investors and other stakeholders.”

Shortly after the International Sustainability Standards Board (ISSB) released its climate-related and general sustainability-related disclosure standards in June 2023, the FSB indicated the standards—which are based on the TCFD recommendations—represent a culmination of the Task Force’s work.

It further indicated that the Task Force would be disbanded upon release of its 2023 status report. Beginning in 2024, the ISSB will assume responsibility of monitoring climate-related disclosures and reporting to the FSB.

With its work coming to a close, the TaskForce has said that it is pleased that the ISSB will monitor progress on the state of climate-related financial disclosures by companies as of next year and support effective implementation of its standards.

“By shining a light on the risks and opportunities posed by climate change, these disclosures empower companies and their stakeholders to make informed decisions that safeguard their future,” said Yeo Lian Sim, TCFD vice chair.

“The TCFD has served as a catalyst for transformative action, and we look forward to continued progress on climate-related financial disclosures under the ISSB.”