Only 16% of FTSE 100 Chairmen or Chief Executives address climate change in the leadership statements of their latest annual report, despite climate change being the defining issue of our time. Black Sun’s latest research report encourages companies to move from “ambition” to “action” as commitments have not always translated into relevant and meaningful disclosures.

“From Ambition to Action”, the latest research report in Black Sun’s Horizon Series finds that 39% of FTSE 100 companies reference the Task Force on Climate-related Financial Disclosures (TCFD) in their reporting, with only two companies meeting all 11 disclosure recommendations.

This is against the backdrop of the UK Government setting a target to bring all greenhouse gas emissions to net zero by 2050, becoming the first G7 country to legislate for net zero emissions. In July 2019, the UK Government released their Green Finance Strategy with the expectation that all listed companies and large asset owners disclose in line with the TCFD recommendations by 2022.

Although companies will be affected differently by climate-related challenges, what will remain the same is the high level of expectation from investors and other stakeholders around the reporting of climate-related issues.

According to Sallie Pilot, Director of Insight and Engagement at Black Sun, “In addition to responding to regulatory and investor pressures, climate-related reporting is important for helping companies prepare for the future, specifically in assessing their long-term viability and integrating climate-related issues into their decision-making processes. One of the key goals of the TCFD is to elevate climate-related issues to board level, and although it focuses on climate, we believe that approaching disclosure in line with recommendations should be extended to other material sustainability-related issues. This will help companies differentiate themselves in the eyes of investors and wider stakeholders.”

Other findings from the report include:

• Financial companies take the lead – those reporting according to TCFD recommendations included two thirds of all financial services companies and only one third of non-financial services companies
• Challenges in embedding into strategy – 32% of FTSE 100 companies disclose climate as principal risk, only 5% discuss the resilience of their strategy
• Greater integration into risk required – 26% disclose board oversight of climate-related risks and opportunities, while only 14% disclose board and management’s role in assessing and managing those risks
• Metrics and targets only just emerging – 20% discuss metrics used while only 13% discuss targets in relation to climate-related risks and opportunities

The research report outlines the status of the TCFD reporting around the four thematic areas – Governance, Strategy, Risk Management and Performance Metrics and Targets – drilling down further to the 11 recommendations across all four sections.

Note:

G20’s Financial Stability Board established the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD is an industry-led group whose purpose is to develop a voluntary and consistent framework for climate-related financial disclosures, with the aim of encouraging companies to align their disclosures with investors’ needs.

For further information, please contact our Insights team: [email protected].