Corporates are taking action to address the risks and opportunities of climate change to fulfil the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), however visible gaps remain, as indicated by latest survey from South Pole.
South Pole's survey on TCFD drivers, preparedness and planning amongst corporates suggests that surveyed business are not yet where they should be when it comes to risk management and reporting in the key four areas of governance, strategy, risk management, and metrics and targets. Despite the Financial Strategy Board target for disclosure in mainstream filings from 2018 onwards, under two in ten of responding companies plan to actually disclose in 2018.
South Pole's survey shows that while almost two thirds of survey participants see a first mover advantage in disclosing according to the TCFD framework, more than half have yet to decide on an actual disclosure strategy, and three quarters are still unsure when exactly they plan to start disclosing.
The TCFD recommendations are designed to propel action at Board level to mitigate climate-related risks, seize on opportunities and transition to a low carbon economy, yet for almost half of the respondents, the responsibility still sits within the CSR department.
Improved transparency for investors will also play an increasingly important role to drive the allocation of capital towards a low-carbon economy, however, first results show that even though over a quarter of respondents believe that TCFD disclosure will satisfy investors, less than one in ten are aware of being asked by investors to disclose.
Out of the four core areas covered by the TCFD recommendations, survey participants were least prepared for the strategy element: three quarters of respondents have not defined or identified scenarios to assess the future physical and transition risks of climate change, despite the increased frequency of extreme weather events increasingly disrupting business operations this summer.
“Businesses will have to reset their approach to climate change risk disclosure: it is no longer a promotional activity or a means to fulfil technical reporting requirements, but a crucial part of overall risk analysis to pinpoint emerging threats and opportunities," says Charles Henderson, Corporate Climate Change Expert, South Pole.
South Pole plans to address the areas of further work by continuing its research on perceived drivers, preparedness and plans for TCFD and conducting a sectoral benchmarking exercise. South Pole is pioneering climate-risk advisory beyond carbon and invites all interested members of the business and investor community to reach out for further information on the survey and to ensure the climate-resilience of their business in the years to come.