Daily Management Review

Arabesque Report Finds Substantial Climate Disclosures Being Made By Only 1.2% Of Top Global Firms


Arabesque Report Finds Substantial Climate Disclosures Being Made By Only 1.2% Of Top Global Firms
Any significant disclosure about the climate risks posed by their business is made by just over one per cent of the five thousand big firms of the world, while no climate risk disclosure is being made by more than 50 per cent of the companies, found a study conducted by ESG research and investment manager Arabesque.
Among the large companies analyzed globally by Arabesque, most of which were big publicly listed companies, only 1.2 per cent published reports on all of the 11 recommendations for climate and environment reporting as was made by the Task Force on Climate-Related Financial Disclosures (TCFD) in 2019.
The report added that no climate risks related reports are published by 44 per cent of the largest companies examined in the report.
A group of regulators, central banks, and treasury officials from G20 countries comprise the Financial Stability Board, which had created the TCFD. This body had in 2017 set out a series of recommendations for companies about how they could make voluntary disclosures about the risks their business activities posed or contributed to climate change.
There is an increasing focus of investors on the exposure of firms to climate change risks even as the Glasgow summit ended last week in which a deal was struck that would for the first time aim to reduce the use of fossil fuels after identifying them as the critical contributor to global warming and consequent climate change.
"We need to put action to the promises," said Arabesque president Daniel Klier. "TCFD is the framework everyone is looking at...the quality of disclosure has to improve quite significantly."
the report found that the least disclosures were made by companies in the health and technology services industries as no disclosure was made by over 70 per cent of companies in this industry. On the other hand companies in the energy sector reported the most information about their exposure to climate change.
"Industries facing most investor scrutiny are industries that are trying to do a better job," Klier said.
The TCFD recommendations are now being used as a basis for mandatory disclosures by companies by regulators in markets such as Britain, the European Union, Brazil, Hong Kong, Japan, New Zealand, Singapore, and Switzerland.
Less than 50 per cent of the companies disclosed climate-related risks and opportunities in some form, which on the average included about only one-third of the 11 recommended disclosures, the TCFD also said last month.
More than 1,600 companies around the world were included in the TCFD's 2021 review.
According to a report published earlier this week by the Coalition for Climate Resilient Investment – which is a group of institutional investors and governments that have more than $20 trillion in assets, one of the major reasons for the "chronic underinvestment" in climate resilience by the private sector is the lack of analytical tools that can be used for quantifying the exposure of assets to physical climate risks.