Research conducted by Manifest Climate has found that although more companies are disclosing climate-related information through voluntary frameworks, the information being provided is still not “decision-useful” for investors and stakeholders.
The firm’s inaugural Disclosure Benchmark Review revealed Taskforce on Climate-related Financial Disclosures (TCFD) adoption among more than 3,000 companies in 65 countries increased from 43% in 2018 to 66% in 2021.
However, despite the uptick in TCFD adoption, a significant proportion of these firms do not include decision-useful information. It found the proportion of disclosures providing decision-useful information is just 49% overall among companies in the countries studied, and 50% for the financial services sector.
It also found that TCFD-aligned disclosure “varies significantly” across sectors when looking at alignments with at least one recommendation.
Laura Zizzo, Manifest Climate chief executive and co-founder, said: “Our analysis supports the findings of the TCFD’s own 2022 progress report that TCFD disclosure is being adopted more widely across the globe. However, the clarity, specificity, consistency and comparability to make the disclosure decision-useful just isn’t there, even within financial services which is a relatively well-advanced sector to TCFD adoption.”
Jeremy Greven president and co-founder added: “The scope and scale of our review provides a unique perspective of historical climate maturity progression. While coverage continues to increase, similar advances are needed in the quality of these disclosures to provide sufficient transparency to the investment community. Actions speak louder than words, but investors need both.”
The review comes in the same month that the first draft of a new disclosure framework for forthcoming mandatory climate reporting from big businesses was issued.
The Transition Plan Taskforce (TPT), which was launched by the Treasury this April, saw the then-Chancellor Rishi Sunak use his platform at COP26 to pledge that large businesses in high-emission sectors would be subjected to new net zero disclosure requirements from 2023. The requirement is around net zero transition plans, which support long-term corporate emissions goals with interim milestones and outline the necessary steps to change business models and investment.
The TPT has now published its first proposal for a ‘gold standard’ of net zero transition plans. It was asked to draw up such a standard to ensure that disclosures are meaningful, and unified, and would deliver the emissions reductions they tout.
The proposal consists of a framework, recommending how companies should develop plans and the key elements they should include; including an implementation guidance document. The guidance includes advice on when, where and how to provide net zero transition plans.
Recently, The European Union (EU) released The Corporate Sustainability Reporting Directive (CSRD), a new piece of legislation aimed at all large companies in the EU, who will need to disclose data on the impact of their activities in a management report.
