Today, on 6 April, the UK has made history by incorporating the recommendations around the Taskforce for Climate-related Disclosure into law – the first of the G20 countries to do so.
The remaining countries are set to follow, which will open up corporates to scrutiny on their climate risk, opportunities and impact.
From today, the 1,300 largest UK-registered companies, including public and private firms, will be required to collate data in line with the TCFD framework and report on these from next year. Since 1 January asset managers with over $50bn in assets under management and asset owners with over £25bn also needed to start collating data.
It will be interesting to see what these reports come up with next year. Will they offer the transparency and much sought-after ESG data on firms that investors have been calling for? Or will they be another opportunity to greenwash?
The latter is a concern following a survey of board members and senior executives at UK companies, which found that more than three quarters (77%) said they are likely to reduce what they will disclose in their TCFD reporting to avoid giving away commercially sensitive information.
The survey, carried out by Censuswide for environmental consultancy RSK, asked 100 c-suite members at UK companies with more than 500 employees and £500m annual turnover about their plans for TCFD and the results are quite alarming.
Despite TCFD recommending disclosures around four pillars (governance, strategy, risk management and metrics and targets), the survey respondents said as there are no set guidelines for how much detail companies will have to report, 73% worry that TCFD is likely to be seen as greenwashing.
However, more encouragingly, 74% said they are ready to comply with TCFD.
See also: – FTSE leaders and laggards for climate reporting
With this, though, brings a new concern – is TCFD another box-ticking exercise? Are they taking it seriously?
Unfortunately, board members and execs surveyed indicated this may be the case – 73% agreed with the statement that, overall, the TCFD process will be a box-ticking exercise rather than useful to the future of our business. Only 16% disagreed.
This sentiment is echoed in today’s comment piece written by Risilience CEO Andrew Coburn who said: “Companies have a choice; create a TCFD report to place a tick in that box or use the TCFD framework to formulate a strategic plan.”
It would be such a shame to waste this opportunity to make real change. As Aviva Investors chief responsible officer Steve Waygood told ESG Clarity recently: “This is not just about the money and risk, it’s about people and the planet.”
And as an industry that is obsessed with numbers and data, complying with TCFD in an authentic way is a real opportunity for companies serious about climate risk to set themselves apart.
Investors and ESG Clarity will be watching the developments of these reports closely over the next few years. Let’s hope the UK sets a great precedent for the rest of the G20 to follow suit.
