by Hank Boerner – Chair & Chief Strategist, G&A Institute
Another in the About the Climate Change Crisis series
Climate Change and Corporate Reporting – the two terms are increasingly coupled now as many more investors and stakeholders are requesting information from publicly-traded companies about their awareness of, and strategies & actions for addressing the many risks posed to the enterprise by climate change.
Important sea change: many more investors are now asking companies for information about their preparation for climate change and some, demanding a report if none has been issued.
Response: Many more companies and especially large-cap companies are now disclosing relevant data and information about their climate change / risk management strategies, plans, actions taken, goals set, and results of their efforts to reduce, mitigate and eliminate climate change risks.
The GRI Standards and the SASB Standards are available to provide managers with excellent disclosure guidelines and reporting frameworks for such reporting — and in the dozens of corporate reports that our G&A Institute analyst team examine each week, we are seeing a steady rise in more robust reporting on issues surrounding climate change.
A new addition to such disclosure and structured reporting are the “TCFD” recommendations for disclosure – these are recommendations of the influential Task Force on Climate-Related Financial Disclosure.
Briefly, why TCFD is important: The central bankers and top financial regulators of the G-20 nations created the Financial Stability Board (FSB) after the 2008 financial crisis to explore potential regulations for expanded corporate reporting (to prevent unpleasant surprises, which financial market players dread!).
Former Mayor Michael Bloomberg was appointed to head a task force (with 32 members) to develop specific suggestions for public companies’ disclosures on climate change that are financially-related.
The task force’s report (with recommendations) was made public in 2017. Companies began responding in their reporting over the following months. At G&A we are seeing the tempo of such reporting increasing as more companies follow the TCFD recommendations.
So where are we? An important report – “The State of Climate Risk Disclosure: A Survey of US Companies” – was just published by our partners DFIN, in collaboration with the writing team of Richard Mahony and Diane Gargiulo and research from The Society for Corporate Governance (“The Society”). The report looks at the evolution of climate-risk disclosure and the state of readiness of corporations to disclose this information.
In partnership with The Society, DFIN conducted a survey of its members on these issues. The results confirmed many of the observations made by the TCFD in its recent update, while also providing new insights into how companies are addressing the challenges associated with climate risk disclosure. (This builds on the earlier report published by DFIN as the TCFD was being released – “Preparing for Climate-Risk Disclosure: Practical Suggestions for Public Companies”.)
The members of The Society for Corporate Governance were surveyed to benchmark what their companies are doing – looking at climate risk, by type; market cap of respondents; frequency of board room discussions on climate risk; use of reporting frameworks; investor queries to the company on climate risk; self assessment of the TCFD (recommendations) implementation; organization structure for climate risk disclosure; and, impediments to TCFD implementation.
The report offers practical steps for companies to take and lessons of the early adopters. Society members offering value-added perspectives include Val Smith at Citi; Michael Rubio at Chevron; and, Steve Lippman at Microsoft (these sharings are of interest for IROs, corporate secretaries & governance professionals, sustainability leaders at companies, and other professionals involved in the corporate sustainability journey).
The Society for Corporate Governance is comprised of governance professionals and business executives responsible for supporting boards and exec management.
DFIN is a leading global risk and compliance solutions company providing expertise to public companies. G&A Institute partners with DFIN to serve corporate client needs with a range of sustainability services including climate change disclosure and reporting.
The G&A Institute team has developed a Resource Paper about the TCFD and what it means for company managements and investment professionals. Click here to download it.
For more information about the TCFD and related disclosure appropriate for your company, contact us at: firstname.lastname@example.org.
The State of Climate Risk Disclosure: A Survey of US Companies
Source: DFIN Solutions
The State of Climate Risk Disclosure: A Survey of US Companies published by DFIN, in collaboration with the writing team from Gargiulo + Partners and research from the Society for Corporate Governance (Society), looks at the evolution of climate-risk disclosure and the state of readiness of corporations to disclose this information.
Also from Governance & Accountability Institute:
G&A’s Climate-Related Corporate Risk Disclosures Resource Guide
Task Force on Climate-related Financial Disclosures | TCFD Organized by the Financial Stability Board of the G-20