Corporate reporting group launches two-year transparency project on green finance

Firemen work to extinguish a forest fire in Corgos, Silves, Algarve, southern Portugal, 08 August 2018. Some 1,492 firefighters, 465 vehicles, and 13 airplanes are fighting the forest fire. [EPA-EFE/MIGUEL A. LOPES]

The new Corporate Reporting Dialogue project will work on aligning international standards with the recommendations published by the Task Force on Climate-related Financial Disclosure in a bid to improve and harmonise reporting on sustainability standards, the group announced Wednesday (7 November).

Participants will map their respective sustainability standards and frameworks to identify commonalities and differences between them, jointly refining and improving overlapping disclosures and data points to achieve better alignment, the group said in a statement.

The new project, which will run for two years, seeks to make it easier for companies to prepare effective and coherent disclosures to investors on climate-related risks in their portfolios.

Improving transparency in financial disclosure is a key element of green finance as it requires investors to disclose sustainability and climate risks.

Exposure to climate-related disasters such as floods, storms or sea-level rises can have a huge impact on property and infrastructure, destroying value and raising insurance rates overnight.

Only 13% of savings collectively managed by the world’s 100 largest public pension funds have undergone formal analysis for exposure to climate-related risks, such as storms, floods, heatwaves and hurricanes.

This leaves $9.8 trillion of assets unprotected from the economic shocks of global warming, the Asset Owners Disclosure Project has warned, saying this poses a risk for investors.

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87% of assets managed by the world’s 100 largest public pension funds are yet to undergo formal climate risk assessment, according to research published on Tuesday (23 October), with only 15% of them adopting a coal exclusion policy.

In an interview with EURACTIV, Paul Simpson, CEO of CDP, a UK-based organisation formerly known as the Carbon Disclosure Project, explained that as a company, there are four categories of risks linked to climate change: risks related to changing policies and regulations, risks related to change in technology, physical risks like extreme weather events (floods, droughts, etc), and risks related to changing consumer sentiment.

Considering the rise in frequency and intensity of extreme weather events, he also warned that companies or sectors may face liabilities on climate-change for not disclosing their climate and sustainability risks.

CDP boss: ‘Companies or sectors may face liability risks on climate change’

Private investors need to come clean and commit to science-based targets on climate change, says Paul Simpson. Unfortunately, “there is still money out there for the dirty investments in the short term,” he laments, calling on regulators to take action against opaque finance.

Better understanding

“Transparent disclosure brings many benefits to global markets. Advancements in corporate reporting over recent years have led to a better understanding of how businesses operate across their value chains. However, as efforts to improve disclosures have emerged, so has a range of varying guidance, frameworks and standards in the field,” Curtis Ravenel, Global Head of Sustainable Business and Finance at Bloomberg, said in a statement, underlining the need to harmonise corporate reporting between different financial actors.

In so doing, the group will take into account the different focuses, audiences and governance procedures, while participants will identify how non-financial metrics relate to financial outcomes and how this can be integrated in mainstream reports, the group said.

Corporate Reporting Dialogue participants have already adopted a Statement of Common Principles of Materiality, developed a common map of the reporting landscape, and took a common position in support of the recommendations of the Financial Stability Board Task Force on Climate-related Financial Disclosure (TCFD) in June 2017, the group said.

Mark Carney, the governor of the Bank of England, launched the ‘Task Force on climate-related Financial Disclosures’, which lists categories of risk it calls transition risks.

Launched four years ago, the Corporate Reporting Dialogue scheme comprises CDP, the Climate Disclosure Standards Board, the Financial Accounting Standards Board, the Global Reporting Initiative, the International Accounting Standards Board, the International Organisation for Standardisation, the Sustainability Accounting Standards Board, and is convened by the International Integrated Reporting Council.

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