Daily Planet

What Should be Included in Climate-Related Financial Disclosures?

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The G20 Financial Stability Board’s Task Force on Climate-Related Financial Disclosures issued its draft recommendations in December, advising businesses to report on climate strategy, risk and scenarios. Some industry players feel this does not go far enough, however.

We ask experts within the Climate-KIC community what they think should be included in climate-related financial disclosures.

“We applaud the recommendations’ emphasis on scenario modelling and asset stress testing. Both transition and physical climate risks can be material to company profitability and the task force’s work should be extended with a broader, stronger mandate.  However, more emphasis needs to be placed on the necessary development of corporate strategies that encourage dynamic, low-carbon tailored business models.  We also need to take a deeper look at the “tragedy of the horizons” issue, which truly destabilises any attempts to plan for, or price, long term risks within the capital markets. Establishing a harmonised climate-related financial disclosure system is crucial for understanding the risks and opportunities brought about by the changes in our climate system.”

David Lunsford, Co-founder, Carbon Delta climate risk analysis services and Climate-KIC partner.

“The guidance structure around governance, strategy, risk management and metrics is a pragmatic first step for organisations disclosing climate risk. Increasing transparency, accuracy and consistency within these publicly available disclosures could help generate very positive additional outcomes, but they could be strengthened, for example, through third party verification and standards. This would allow experts, analysts and policy makers to combine, aggregate and cross-check disclosures, opening the door to additional information to improve investors’ ability to correctly price risk and opportunity: per country, sector and climate risk.”

Victor Gancel, Programme Manager Low Carbon City Lab, Climate-KIC