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Is your Climate Related Disclosure fit for Impactful Investment?

Monday, September 30, 2019

In order to efficiently direct capital to investments useful for climate change mitigation and adaptation measures, companies need to include Climate-related financial disclosure into their reporting. However, only around 25% of companies disclose information aligned with the criteria set by the Task Force for Climate Finance Disclosure. Discover how to manage Corporate Climate Impact and register to the technical workshop co-hosted by CSR Europe and the European Investment Bank on 13 November.

 

The UN Climate Action Summit in New York on 21-23 September further confirmed increasing percentages ofcapital flow shifting towards financing the transition to a sustainable economy. Climate-related financial disclosure has to be on the radar of any company as it is a critical contributor to efficiently direct capital to investments that drive solutions for climate change mitigation and adaptation. However, the challenges are not small and the speed in which change is expected is unprecedented. Companies and investors need to work to close the gaps identified in non-financial disclosure to prepare the field for impactful investment.

To keep members abreast of updates occurring at European level about tools and methodologies available on managing and reporting on corporate climate impact, CSR Europe is partnering with the European Investment Bank (EIB) to co-host the technical workshop « Managing Corporate Climate Impact: The role for internal carbon pricing and external disclosureon 13 November 2019, in Paris

 

How to finance the transition to a sustainable economy

Banks are adopting the Principles for Responsible Banking to strategically align their business with the goals of the Paris Agreement on Climate Change and the Sustainable Development Goals, and massively scale up their contribution to both. At the same time, the European Union is strongly supporting the transition to a low-carbon, more resource-efficient and sustainable economy and it has been at the forefront of efforts to build a financial system that supports sustainable growth. The EU Sustainable Finance Action Plan and more specifically the  EU Regulation on disclosures relating to sustainable investments and sustainability risks are aimed at unlocking private finance to facilitate the transition to a green economy.

 

The decision-useful climate-related financial information

In its 2019 Status Report, the Task Force for Climate Finance Disclosure (TCFD) is concerned that “not enough companies are disclosing decision-useful climate-related financial information”. Only around 25% of companies disclose information aligned with more than five of the 11 TCFD recommended disclosures and only 4% of companies disclosed information aligned with at least 10 of the recommended disclosures.  

CEO and CFO will be buzzing about the TCFD guidelines or taxonomy after interactions with financial and investor community.  But investors and analysts are lacking the skills and resources on business sector knowledge to combine financial and non-financial analysis. Companies need to clearly state what their climate policy has been designed to achieve and how.  

 

A broader perspective on the climate strategy of companies

A broader perspective on the climate strategy of companies is needed. Finding common ground between report preparers and users on the right climate disclosure practices is not a one-way street. But the disclosure of climate-related information cannot be presented in a bubble. It must form part of the big picture that links up with the business model and a just transition for your employees and the communities in which the company operates.

Investors and financial institutions are right to expect accessible and understandable information that depicts the company’s strategy on climate change mitigation and adaptation. Opportunities and the investment to back it up are key to addressing climate change for business and the planet’s success.

The European Commission will undertake a revision of the non-financial disclosure that will include TCFD guidelines and demand for decision-useful climate-related information. CSR Europe and its members will continue to play a major role in this policy dialogue, encouraging institutions, corporations and other stakeholders, to find workable solutions. We understand the speed that is needed but it is necessary that the facts and data are considered in the right context.

 

More information:

Paula Byrne

Director of Sustainability Management & Networks