Climate Risk Reporting Got You All Acronymed Out?
Published - 20 November, 2019
A look at the TCFD, SASB & CDSB
As the globe begins to create greater awareness on moving towards greener energy and the climate crisis several frameworks, organisations and bodies have been established to assist companies with communicating their sustainability plans, practices and progress effectively to their investors.
The Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD) is a market-driven initiative, set up to develop a set of recommendations for voluntary and consistent climate-related financial risk disclosures in mainstream filings.
The TCFD Knowledge Hub is a platform designed to help organizations implement the TCFD recommendations by providing over 300 relevant insights, tools and resources. Resources include existing legislation and regulations, frameworks, standards, guidance, research papers, tools and webinars.
The TCFD recommendations are designed to solicit consistent, decision-useful, forward-looking information on the material financial impacts of climate-related risks and opportunities, including those related to the global transition to a lower-carbon economy.
To better understand current climate-related financial disclosure practices and how they have evolved, the Task Force has published a report in which they have reviewed the reports of over 1,100 companies from 142 countries in eight industries over a three-year period. The Task Force also conducted a survey on companies’ efforts to implement the TCFD recommendations as well as users’ views on the usefulness of climate-related financial disclosures for decision-making.
While the Task Force has found some of the results of its disclosure review and survey encouraging, it carries concern that not enough companies are disclosing decision-useful climate-related financial information.
After reviewing financial filings, annual reports, integrated reports, and sustainability reports, the Task Force found that:
- Disclosure of climate-related financial information has increased since 2016 but is still insufficient for investors.
- More clarity is needed on the potential financial impact of climate-related issues on companies.
- Of companies using scenarios, the majority do not disclose information on the resilience of their strategies.
- Mainstreaming climate-related issues requires the involvement of multiple functions.
The Climate Disclosure Standards Board is a non-profit organization working to provide material information for investors and financial markets through the integration of climate change-related information into mainstream financial reporting.
The CDSB’s prides itself on integrating climate change-related disclosure into mainstream financial reports. The organisation is an international consortium of business and environmental NGOs, which is committed to advancing and aligning the global mainstream corporate reporting model to equate natural capital with financial capital.
This is done by offering companies a framework for reporting environmental information with the same rigour as financial information. In turn this helps companies to provide investors with decision-useful environmental information through the mainstream corporate report, enhancing the efficient allocation of capital. Regulators also benefit from compliance-ready materials.
The CDSB asserts that distinguishing that information about natural capital and financial capital is equally essential for an understanding of corporate performance. Therefore, the organisation’s work builds the trust and transparency needed to foster resilient capital markets. It’s aim is to contribute to more sustainable economic, social and environmental systems.
The Sustainability Accounting Standards Board (SASB) connects businesses and investors on the financial impacts of sustainability.
SASB’s mission is to help businesses around the world identify, manage and report on the sustainability topics that matter most to their investors. SASB’s standards are developed based on extensive feedback from companies, investors, and other market participants as part of a transparent, publicly-documented process.
SASB standards differ by industry, enabling investors and companies to compare performance from company to company within an industry.
With SASB standards, companies can benefit from greater transparency, better risk management, improved long-term performance and stronger, more valuable brands — while providing investors with a more accurate picture of their sustainability performance.
SASB standards and tools are helping companies:
- identify the handful of ESG and sustainability topics that most directly impact their long-term value creation;
- implement principles-based reporting frameworks including Integrated Reporting and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD); and
- communicate sustainability data more efficiently and effectively to investors.
SASB can be a core part of any reporting system. Whether used alone, alongside other reporting frameworks or as part of an integrated report, SASB standards and metrics enable companies to communicate with investors in a detailed, powerful way.