More companies disclosing climate information, but more progress needed, task force says

More companies are disclosing climate-related financial information but "more urgent progress is needed," according to a status report from the Task Force on Climate-related Financial Disclosures released Thursday.

The task force first published climate-related financial disclosure recommendations for companies to follow in 2017. Since then, the average number of recommended disclosures addressed per company rose to 4.2 in fiscal year 2021, up from 1.4 in 2017 fiscal year reporting, the 2022 TCFD Status Report said.

More than 60% of the companies reviewed disclosed their climate-related risks or opportunities in their 2021 fiscal year reports, compared with 27% in 2017, the status report found.

Yet while 80% of companies disclosed in line with at least one of the 11 TCFD-recommended disclosures, only 43% disclosed in line with at least five, and just 4% followed all 11.

The 2022 report is based on publicly available reports of more than 1,400 companies from eight industries and five regions. It also surveyed asset owners and managers on their TCFD reporting practices.

Investor demand is "a key driving factor" in the improved corporate disclosure, the TCFD report said. It noted that 700 Climate Action 100+ investors with a collective $68 trillion in assets engage the world's largest corporate greenhouse gas emitters to implement the TCFD recommendations, while 680 financial institutions with a collective $130 trillion in assets ask companies to disclose through similar disclosures at CDP, a global disclosure organization.

More than 75% of asset owners and 60% of asset managers surveyed currently report climate-related information to their clients and beneficiaries. The report found 75% of asset owners and 50% of asset managers reported information aligned with at least five recommended disclosures, and 36% of asset owners and 10% of asset managers reported on all 11.

Another development noted since the 2021 status report were "further significant actions" by regulators and international standard setters to use the TCFD recommendations in developing climate-related reporting requirements and standards.

Climate-related financial disclosures on an industry and regional basis improved over the past three years, the report found, with average disclosure levels of 43% for energy companies, 42% for materials and buildings companies, and 41% for banks and insurance companies.

Regionally, the European companies reviewed disclosed 60% of recommended disclosures in fiscal year 2021, compared with 29% in North America and 36% in the Asia Pacific region. In North America, 60% of companies disclosed climate-related risks or opportunities and 45% disclosed their impacts, the report noted.

TCFD Chairman Michael R. Bloomberg said in the report's introduction, "It is encouraging to see that consideration of the implications of climate change has become far more mainstream throughout financial markets since 2017, and that an increasing number of companies are publicly committing to net-zero emissions transition plans," but the report also "makes clear that more urgent progress is needed."