The world's largest companies are committed to reporting on climate-related risks and opportunities in line with the guidance set out by the influential Taskforce on Climate-related Financial Disclosures (TCFD), but only a handful of corporates have fully embraced climate risk reporting best practices.
That is the headline conclusion of the sixth and final status report from the TCFD, published Thursday, which highlights how there has been "steady momentum" in the number of companies disclosing TCFD-aligned information, but warns "more progress is needed" if corporates and investors are to adequately respond to escalating climate risks.
Established in 2015 by the Financial Stability Board, the TCFD subsequently produced detailed guidelines on how businesses and investors should publicly report on the climate-related risks and opportunities faced by their organization. The guidance called on companies and investors to report on how climate change is affecting both their operations and value chains, and urged boards to model various scenarios detailing how the net zero transition could affect their financial outlook.
The guidelines have become hugely influential and have been incorporated in numerous reporting standards and regulations worldwide.
This summer, the International Sustainability Standards Board (ISSB) released its climate-related and general sustainability-related disclosure standards, which drew heavily on the TCFD's work. The FSB said the new standards represented the culmination of the Taskforce's work and announced the group would be disbanded upon release of its 2023 status report.
The new report confirms that 97 of the 100 largest companies in the world have declared support for the TCFD or report in line with the TCFD recommendations.
Only a small number of corporates are reporting in line with all 11 recommendations set out by the TCFD.
However, it also reveals that only a small number of corporates are reporting in line with all 11 of the recommendations set out by the TCFD.
On average for fiscal year 2022, companies reported in line with 5.3 of the Taskforce's 11 recommended disclosures, up from an average of 3.2 in 2020. Fifty-eight percent of listed companies disclosed in line with at least five of the 11 recommended disclosures — up from 18 percent in 2020. But only 4 percent disclosed in line with all 11 recommendations.
The report also revealed that most corporates including climate-related financial information in financial filings remains limited, despite that most jurisdictions with final or proposed climate-related disclosure requirements specify that disclosures should be reported in financial filings or annual reports. 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.
In addition, the report confirmed similar progress is being made across the investment community. Over 80 percent of the largest asset managers and 50 percent of the largest asset owners reported in line with at least one of the 11 TCFD recommended disclosures. Based on a review of publicly ava
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