A report released by the Task Force on Climate-Related Financial Disclosures (TCFD) indicates that a greater percentage of companies have disclosed climate-related information since 2017, and that these companies are also disclosing more information, but they are still not making as many disclosures as the Task Force recommends.

In its executive summary, the reported stated, “Over the past five years, the Task Force has seen significant momentum around adoption of and support for its recommendations as detailed in previous status reports as well as in this report. In particular, the percent of companies disclosing information in line with the Task Force’s recommendations has steadily increased each year as has the amount of TCFD-aligned information companies disclose. In addition, since the publication of the 2021 status report, there have been further significant actions by regulators and international standard setters to use the TCFD recommendations in developing climate-related reporting requirements and standards — including but not limited to proposals released earlier this year by the U.S. Securities and Exchange Commission, the International Sustainability Standards Board, and the European Financial Reporting Advisory Group.The Task Force considers these positive developments as entirely consistent with views expressed in its 2017 report.” 

Specfically, the Task Force has recommended 11 climate-related financial disclosures for corporations:

1) Describe the board’s oversight of climate-related risks and opportunities; 2) Describe management’s role in assessing and managing climate-related risks and opportunities; 3) Describe the climate-related risks and opportunities the company has identified over the short, medium, and long term; 4) Describe the impact of climate-related risks and opportunities on the company’s businesses, strategy, and financial planning; 5) Describe the resilience of the company’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario; 6) Describe the company’s processes for identifying and assessing climate-related risks; 7) Describe the company’s processes for managing climate-related risks; 8) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the company’s overall risk management; 9) Disclose the metrics used by the company to assess climate-related risks and opportunities in line with its strategy and risk management process. 10) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks; and 11) describe the targets used by the company to manage climate-related risks and opportunities and performance against targets.

In summarizing its research, the report listed seven key takeaways and findings:

• The percent of companies disclosing TCFD-aligned information continues to grow, but more urgent progress is needed. For fiscal year 2021 reporting, 80 percent of companies disclosed in line with at least one of the 11 recommended disclosures; however, only 4 percentage disclosed in line with all 11 recommended disclosures and only around 40 percent disclosed in line with at least five.

 • All regions have significantly increased their levels of disclosure over the past three years. In particular, the average level of disclosure across the 11 recommended disclosures for European companies was 60 percent for fiscal year 2021, growing 23 percentage points since fiscal year 2019; 36 percent for Asia Pacific companies—an increase of 11 percentage points; and 29 percent for North America companies—an increase of 12 percentage points.

• A majority of asset managers and asset owners report to their clients and beneficiaries. Over 60 percent of asset managers and over 75 percent of asset owners surveyed indicated they currently report climate-related information to their clients and beneficiaries, respectively. The majority of asset managers report through sustainability reports or directly to clients, while the majority of asset owners report through annual, sustainability, or climate-specific reports.

• Nearly 50 percent of asset managers and 75 percent of asset owners reported information aligned with at least five of the 11 recommended disclosures. Based on survey responses, 60 percent of asset managers and nearly 80 percent of asset owners indicated they report information aligned with at least one recommended disclosure, whereas only 9 percent of asset managers and 36 percent of asset owners report on 10 recommended disclosures. None indicated they report on all 11.

• The percent of companies disclosing the TCFD recommendations in financial filings or annual reports has increased each year. Based on the TCFD survey, over 70 percent of companies implementing the TCFD recommendations disclosed climate-related information in financial filings or annual reports (including integrated reports) for fiscal year 2021 compared to 45 percent for fiscal year 2017.

• The availability and quality of climate-related financial disclosures has increased since June 2017. Ninety-five percent of survey respondents saw an increase in the availability of climate-related financial disclosures since the release of the TCFD recommendations, with 88 percent of respondents citing improvements in the quality of disclosures.

• Investors and others use disclosures in decision-making and pricing. Based on the TCFD survey, 90 percent of investors and other users incorporate climate-related financial disclosures in financial decision-making, and 66 percent of these indicated such disclosures factor into the way they price financial assets. In addition, based on a literature review, there is a growing body of evidence that climate-related risks are beginning to affect prices for certain types of assets.

The report also revealed the report’s methodology: “The Task Force reviewed—using artificial intelligence technology—publicly available reports for over 1,400 large companies in specific sectors around the world over a three-year and five-year period. In addition, the Task Force conducted two surveys in 2022 one to gain insight on asset managers and asset owners’ TCFD-aligned reporting practices and the other on companies’ efforts to implement the TCFD recommendations as well as investors and other users’ views on the usefulness of climate-related financial disclosures for decision-making.”

The report concluded that the Task Force is generally encouraged “by companies’ progress in disclosing climate-related financial information aligned with the TCFD recommendations and by the support of regulators and standard setters in using the recommendations as a basis to develop laws, rules, and standards on climate-related financial disclosure. Nevertheless, the Task Force remains concerned that not enough companies are disclosing decision-useful climate-related financial information, which may hinder investors, lenders, and insurance underwriters’ efforts to appropriately assess and price climate-related risks.”