Featured Product

    FSB Report Finds Steady Increase in Climate-Related Disclosures

    October 29, 2020

    FSB published the annual report that examines to-date progress toward implementation of climate-related disclosure recommendations of the industry-led Task Force on Climate-related Financial Disclosures (TCFD). The report finds that disclosure of climate-related financial information aligned with the TCFD recommendations has increased steadily since these recommendations were published by TCFD in June 2017. However, the report highlights the continuing need for progress in improving the levels of TCFD-aligned disclosures, given the urgent demand for consistency and comparability in reporting. The next status report is expected to be published in September 21, 2020.

    The report provides an overview of the current disclosure practices in terms of their alignment with the Task Force’s recommendations. The TCFD recommendations provide a framework for companies and other organizations to develop more effective climate related financial disclosures through their existing reporting processes. The report also highlights specific climate-related information a group of expert users identified as the most useful for making financial decisions, addresses the top implementation issues identified by nearly 200 preparers, and includes case studies by financial sector preparers on implementing the recommendations. The following are a few key takeaways of this report:

    • Disclosure of climate-related financial information has increased since 2017, but continuing progress is needed. Disclosure of TCFD-aligned information increased by six percentage points, on average, between 2017 and 2019. On average across the TCFD recommendations, 42% of companies with a market capitalization greater than USD 10 billion disclosed at least some information in line with each individual TCFD recommendation in 2019. However, companies’ disclosure of the potential financial impact of climate change on their businesses and strategies remains low. TCFD recognizes the challenges associated with making such disclosures but encourages continued efforts and faster progress.
    • Nearly 60% of the world’s 100 largest public companies support TCFD, report in line with the TCFD recommendations, or both. In addition, nearly 700 organizations have become TCFD supporters since the Task Force issued its 2019 status report, an increase of over 85%.
    • Energy companies are leading on disclosure, with an average level of TCFD-aligned disclosures of 40% for energy companies. In comparison, the average percentages of disclosures among insurance companies and banks are 27% and 23%, respectively. A higher average percentage of disclosure indicates that an industry generally disclosed at a higher rate across the 11 recommended disclosures.
    • Expert users of disclosure identified the impact of climate change on a company’s business and strategy as the “most useful” information for financial decision-making. Notably, this information has the lowest level of disclosure across the recommendations, with just one in 15 companies making this disclosure.
    • Insights of expert users on the most useful information for decision-making may provide a roadmap for preparers. Companies already disclosing their governance and risk management processes for climate-related issues and working toward full TCFD implementation might consider expert users’ relative ranking of specific types of climate related information—from most useful to least useful—as one factor to consider in prioritizing their efforts.
    • Asset manager and asset owner reporting to their clients and beneficiaries is likely insufficient. While TCFD-aligned reporting by a sample of asset managers and asset owners increased over the past three years, the Task Force believes reporting by these organizations to their clients and beneficiaries may not be sufficient and that more progress may be needed to ensure clients and beneficiaries have the right information to make financial decisions.
    • Progress in the public sector is also accelerating. Among others, Canada, Chile, the European Union, Hong Kong, Japan, New Zealand, the UK, Singapore, and South Africa have announced new policies, partnerships, or other formal support for climate-related financial disclosure in line with the TCFD recommendations.

    The report also provides a "roadmap" for preparers through highlighting insights from expert users on which information is most useful for decision making. Going forward, it will be important to bring more standardization to reporting requirements across different countries and jurisdictions, to minimize the burden for reporting companies and maximize the value of disclosure for investors. FSB has asked TCFD to undertake further analysis on the extent to which companies describe the financial impact of climate-related risks and opportunities on their businesses and strategies. TCFD also plans to gain better insight into reporting practices of asset managers and asset owners to their clients and beneficiaries.


    Related Links

    Keywords: International, Banking, Insurance, Securities, TCFD, Disclosures, Climate Change Risk, ESG, FSB

    Related Articles
    News

    HKMA Finalizes Policy Modules on Group-Wide Approach and Remuneration

    The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.

    July 29, 2021 WebPage Regulatory News
    News

    EBA Guide to Monitor Threshold for Intermediate Parent Undertakings

    The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).

    July 28, 2021 WebPage Regulatory News
    News

    PRA Finalizes Approach to Supervision of International Banks

    In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.

    July 26, 2021 WebPage Regulatory News
    News

    FCA Issues PS21/9 on Implementation of Investment Firms Regime

    The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.

    July 26, 2021 WebPage Regulatory News
    News

    EBA Proposes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.

    July 26, 2021 WebPage Regulatory News
    News

    IOSCO Proposes Recommendations on ESG Ratings and Data Providers

    The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.

    July 26, 2021 WebPage Regulatory News
    News

    ESMA Group Issues Recommendations on RFR Switch in Interdealer Market

    The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.

    July 26, 2021 WebPage Regulatory News
    News

    ECB Study Assesses Impact of Basel III Finalization Package

    The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.

    July 26, 2021 WebPage Regulatory News
    News

    ISDA Finds FRTB Results in Higher Capital Charges for Carbon Trading

    The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.

    July 26, 2021 WebPage Regulatory News
    News

    PRA Updates Remuneration Policy Statement Templates and Tables

    The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.

    July 26, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7307