The Carbon Disclosure Project (CDP) made several announcements on its initiatives to take forward the climate risk disclosures and help achieve global policy goals, in the context of COP27. CDP announced its intent to incorporate the climate risk disclosure standard of the International Sustainability Standard Boards (ISSB) into its global environmental disclosure platform. CDP also launched an analytical tool on climate data to assist policymakers, set out insights on the environmental disclosure data in 2022, issued a statement on the United Nations Environment Program (UNEP) Emissions Gap report, and published a report on European Union Recovery Funds and the European Green Deal.
Below is a summary of the recent announcements:
- CDP announced that it will incorporate the climate-related disclosures standard (IFRS S2) from ISSB into its global environmental disclosure platform. By collecting this data, CDP will provide investors, and other stakeholders, access to corporate environmental information that is consistent, comprehensive, and comparable across geographies, also reducing the reporting burden for companies. CDP will also provide the IFRS Foundation with access to data on disclosures against the climate standard, to help monitor uptake and implementation of the standards and pursue continuous improvement. This announcement sends clear signal to the global market, ahead of finance day at COP27, that CDP and ISSB are responding to market demand for effective, consistent climate-disclosure.
- CDP launched a dashboard, which provides an online analytics tool to empower policymakers with the data and insights they need to make effective policy decisions on climate and nature—and accelerate action to limit warming to 1.5°C. The dashboard contains data on global disclosures, deforestation, water security, and the Task Force on Climate-related Financial Disclosures or TCFD. The dashboard will enable policymakers to see the progress of climate and nature targets set by companies, cities, and regions who use CDP for disclosures. The dashboard will help governments to understand country-level progress and identify areas for policy intervention. Going forward, CDP will expand the dashboard to provide further in-depth insights covering supply chains, financial institutions, and the sustainable development goals or SDGs.
- With respect to the published disclosure data, CDP notes that a record 18,700+ companies representing half of global market capitalization and more than 1,100 cities, states, and regions have disclosed the environmental data through CDP in 2022 on climate change, deforestation, and water security. With mandatory disclosure regulation set to take effect within the next three years in many major economies, more than 29,500 companies worth at least USD 24.5 trillion still failed to respond to the disclosure request. The top five countries in terms of corporate disclosures in 2022 were the United States (3,700+ disclosing companies), followed by China (2,500+), Japan (1,700+), the UK (1,400+), and Brazil (1,300+). This data obtained through disclosure will be critical to effectively capturing global progress, identifying gaps, and increasing ambition. These insights had been published before COP27, where governments were to focus on assessing progress toward meeting the Paris Agreement goals through the Global Stocktake.
- In its statement on the UNEP Emissions Gap report, CDP notes insufficient action, so far, to address climate change and calls on high-emitting economies and entities to reduce their emissions at a faster rate. Ahead of COP27, CDP directs this call toward those high-emitting economies and entities as well as those most capable to contribute to mitigating them, emitting or not, whose lack of action to date has disproportionally affected the most vulnerable across the planet and pushed the world to the brink of no return. Governments were given an unprecedented window of one year to review and strengthen their nationally determined contributions ahead of COP27. However, when the deadline passed last month, just 23 of the nearly 200 countries that signed the Glasgow Climate Pact had done so. Many major emitters did not increase their ambition, leaving us on track to reduce global emissions by only 7% by 2030. Thus, it is essential that developed countries keep their promises: they committed to USD 100 billion annually for developing countries many years ago, which has remained unmet. Negotiations on a new target for climate finance are set to take place at COP27.
- The data showed that emission-reduction targets publicly disclosed by companies in G7 economies are still only ambitious enough to align with a 2.7°C decarbonization pathway. CDP states that companies, financial institutions and subnational Governments must be held to account for progress, or lack thereof, against their commitments. Climate transition plans are essential: setting a target is an important first step, but a climate transition plan is vital in ensuring that a company has a delivery plan in place for the next critical five years. By disclosing through CDP, companies can then transparently track progress and be held to account.
- The Institutional Investors Group on Climate Change (IIGCC), The Principles for Responsible Investment (PRI), and CDP, under the auspices of The Investor Agenda, commissioned Chronos Sustainability to prepare a report on the EU Recovery Funds and the European Green Deal. The report provides an overview of the long-term EU budget and EU recovery funds and how these are targeted to promote a green and resilient future. The purpose of the report is to highlight the opportunity for investors to become involved in facilitating the green transition and considerations for both investors and policymakers in sustainability-linked public funding programs. The report sets out recommendations for policymakers in European Union to attract more private investment in green transition projects by increasing consultation with external stakeholders; improving data on monitoring, implementation, and climate effects; and ensuring private investment in these sectors is not “crowded out” by public investment.
Keywords: International, Banking, Securities, ESG, ISSb, Sustainable Finance, Disclosures, Climate Change Risk, Reporting, COP27, Low Carbon Economy, Paris Agreement, European Green Deal, EU, CDP
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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