Monday’s announcement of a proposed climate disclosure rule by the U.S. Securities and Exchange Commission (SEC) is a welcome step toward a safer, healthier planet and a thriving national economy.
CDP has prepared the world for this. Now our theory of change has become the norm.
More than 20 years ago, CDP invented environmental disclosure. This was a breakthrough moment, bringing capital to the table and propelling the low-carbon transition. Now, we applaud the move to formalize what we have known for decades: that the climate crisis not only endangers lives – it also poses an enormous risk to our global financial system.
CDP is delighted that climate disclosure has taken the mainstream stage and looks forward to dialogue in the months ahead. For today, here’s what companies and investors need to know.
1) CDP pioneered climate disclosure and our expertise has led to this sea change
CDP has played a central role in mainstreaming ESG disclosure, which is now a business norm. CDP created the momentum and model for environmental disclosure, spurring a vast, standardized and comparable global dataset covering over half of the world’s market capitalization. In 2021, CDP saw record disclosures, with over 14,000 organizations disclosing data on climate change, water security and deforestation issues. This covers over 13,000 companies (3,900 from the US) worth over 64% of global market capitalization, including SMEs supplying some of the world’s biggest corporations.
Over the past few months, we’ve even seen some of our A List companies express enthusiastic support for environmental disclosure and action to federal agencies, encouraging national policy that protects lives, livelihoods and our economy. Their leadership – enhanced by CDP’s longstanding model of accountability and transparency – has helped catalyze this exciting policy development. We have proven to the world that disclosure is both doable and desirable.
2) CDP disclosers are prepared
The SEC’s rule largely tracks the Task Force on Climate-Related Financial Disclosures (TCFD). CDP’s climate disclosure has been fully aligned with the TCFD since 2018, so companies that currently disclose through CDP are well prepared for this change. By translating the TCFD recommendations and pillars into actual disclosure questions in a standardized annual format, CDP provides investors and disclosers with the only platform where the TCFD framework can be brought into real-world practice.
In its proposed rule, the SEC recognizes CDP’s important role in implementing the TCFD recommendations: “the CDP questionnaire fully incorporates the TCFD framework and thus exhibits full alignment.”
3) CDP continues to lead on environment
While we commend the SEC for taking this important step to keep the US safe and competitive in the low-carbon economy of the future, CDP will continue to push the bar higher through annual voluntary disclosure.
CDP continues to develop the scope and reach of disclosure: over the past 20 years, CDP has expanded beyond climate change to now also operate annual investor requests on water security and forests. On the horizon, our ongoing evolution includes expanding to biodiversity, land use and oceans disclosure – vital issues that allow companies to do much more than just monitor and cut emissions. Leading businesses are looking critically at how they can ensure a vibrant, habitable planet for all, and CDP is growing to support them.
Ultimately, while federally-mandated climate disclosure benefits us all, it cannot replace voluntary, investor-grade environmental disclosure – which provides investors, policymakers and civil society leaders with the comparable, standardized data and insights they need to make apples-to-apples comparisons, inform investment decisions and advance ambitious climate action. Anything less than CDP disclosure is simply not enough.
Soon, we’ll provide more information on aligning CDP disclosure with SEC reporting. US companies and investors can count on CDP to provide them with clarity and best practice as the policy landscape shifts.
Over the past year, the US has returned to the world stage on climate change policy. As the SEC and other federal agencies advance this vital work, CDP will continue to provide essential transparency and accountability to lead the US and the rest of the world to a truly safe, stable future.