(NEWSManagers.com) – The Working Group on Climate-Related Financial Disclosures (TCFD) announced on October 14 several changes to its recommendations to facilitate climate reporting. Companies are no longer encouraged to conduct an external audit of the materiality of published Scope 1 and Scope 2 data on greenhouse gas emissions, that is, information regarding direct and indirect emissions from in-house production.
This also applies to asset managers and institutional investors, who can now include carbon footprint information in reports to clients and beneficiaries without this materiality assessment.
According to the TCFD, this should encourage all companies to disclose this data. “Scope 1 and 2 emissions data are essential information to understand the global situation of greenhouse gas emissions. All companies must publish their Scope 1 and 2 emissions, which is not very difficult to obtain. This information it is critical for policy makers, regulators, companies and investors who want to better understand their exposure to climate risks, ”said Mary Schapiro, head of the TCFD secretariat.
This working group also asked financial institutions to indicate the extent to which their activities are aligned with a global warming scenario well below 2 ° C. They are also invited to publish now their greenhouse gas emissions for the business assets or activities in question, where data and methodologies allow.
With regard to “scope 3” data, which covers emissions from the rest of the value chain, the TCFD has not made any changes to the recommendation policy. According to its manager, the data on financed issues of financial institutions covers a significant part of the Scope 3 universe.
These updates follow a public consultation, held this summer, with the goal of improving these recommendations. In particular, it found that only one in five professionals responsible for preparing this data included details about the impact of climate on financial performance. The main obstacles encountered in publishing this information were the lack of experience and resources, the difficulty in accessing relevant data, and the selection or application of methodologies. The information reviewed focused primarily on potential financial impacts rather than actual financial impacts. Therefore, the new TCFD recommendations also aim to close these existing gaps and ensure that users of this data have access to useful information.
Media and technology are bad students of climate information
Since their launch in 2017, adoption of these recommendations has accelerated significantly, the TCFD said. The task force has examined the annual reports of 1,651 publicly traded companies around the world over the past three years to assess their adherence to its recommendations. Despite an increase in the integration of this information in the non-financial reports of the companies between 2019 and 2020, one in three companies has limited itself to publishing financial information related to the climate aligned with the TCFD recommendations.
Information on climate-related risks and opportunities is the most likely to be published, while data on business resilience under various climate scenarios is the least published. Information related to governance is also poorly communicated: 25% report on board oversight and 18% on the role of management in assessing and managing climate-related risks and opportunities.
At the sector level, companies in the materials and construction sectors lead the adoption of recommendations, with a 38% participation in this TCFD report (+12 points in one year). Sectors that emit the least carbon, such as technology and the media, rank last with an average of 16% of voluntary companies (+4 points). Geographically, Japan takes the lead with 527 participants, followed by the United Kingdom (384), the United States (345), Australia (125) and France (117).
The TCFD now has more than 2,600 followers worldwide, including 1,069 financial institutions managing $ 194 billion (€ 167 billion).
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