Julia Irvine 11 Dec 2017 01:31pm

Business and investors back climate-related reporting framework

A 67-strong group of leading finance chiefs, pension fund chairmen and accountancy body chief executives have joined together in a campaign to improve the level of climate-related disclosures around the world
Caption: Companies are enabling market forces to drive efficient allocation of capital and to support a smooth transition to a low carbon economy

They have signed a statement of support for the Task Force on Climate-related Financial Disclosures’ (TCFD) recommendations. These supply a framework for disclosing climate related risks and opportunities by including them in the mainstream financial filings and using scenario analysis to inform business strategies.

“Action by the finance community is vital if we are to tackle climate change,” commented Jessica Fries, executive chair of The Prince’s Accounting for Sustainability (A4S) which organised the statement.

“We need visible leadership, and the combined commitment to support adoption of the TCFD recommendations from CFOs, accounting bodies and pension funds represents the kind of collective effort required to accelerate the shift towards a sustainable economy.”

Fries added that by disclosing the information, particularly in areas such as scenario analysis, companies would be taking an important step forward in enabling market forces to drive efficient allocation of capital and to support a smooth transition to a low carbon economy.

The group of 37 CFO signatories, which together represent $1.5trn (£1.1trn) in total assets, includes Deloitte, KPMG, PwC, Moody’s, Norsk Hydro, Royal DSM, Tata, Unilever and DowDupont.

The 13 accountancy bodies’ CEO signatories include ICAEW, Institut der Wirtschaftsprüfer in Deutschland, Chartered Professional Accountants of Canada, the Global Accounting Alliance and the Chartered Accountants Australia and New Zealand. Together they represent 2.9 million accountants worldwide.

Among the 15 pension fund investors, who have a combined total of $234.7bn assets under management, are the London Pensions Fund, The Church Commissioners for England, HSBC Bank Pension Fund, Legal &General and NEST.

Speaking for the investors, Emma Howard Boyd, chair of the Environment Agency and its pension fund investment committee, said, “Climate change is one of the biggest global threats we face and the finance sector needs to be more than equal to the challenge,

“The industry needs to step up to challenges posed – we need more action and we need it now.”

The signatories are hoping that other organisations will follow their example and support the TCFD recommendations.

The four recommendations apply to organisations across all sectors and jurisdictions. They are based on four thematic areas covering governance, strategy, risk management and metrics and targets.

At the time of their launch in June this year, Mark Carney, governor of the Bank of England, said that the recommendations had been developed by the market for the market and encompassed disclosures that a broad range of users and preparers had argued were essential to understanding a company’s climate-related risks and opportunities.

“Widespread adoption will provide investors, banks and insurers with that information, helping minimise the risk that market adjustments to climate change will be incomplete, late and potentially destabilising,” he added.

The recommendations will be one of the key areas up for discussion at tomorrow’s One Planet Summit in Paris.

Government and business will be debating the issue with a view to formulating tangible actions to deal with “the ecological emergency facing our planet, our society and our economy”.

The task force was set up by the Financial Stability Board in 2015 to develop voluntary climate-related financial risk disclosures which companies could use to enhance the information they provide to lenders, insurers, investors and other stakeholders.