Now more than ever, capital markets need comprehensive, high-quality and comparable information from companies on the impacts of climate change. That is why recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) were launched in 2017 - to improve and increase reporting of climate-related financial information.
CDP’s disclosure platform provides the mechanism for reporting in line with the TCFD recommendations. By translating the TCFD recommendations and pillars into actual disclosure questions and a standardized annual format, CDP provides investors and disclosers with a unique platform where the TCFD Framework can be brought into real-world practice. Companies which disclose through CDP are doing so in line with the TCFD recommendations, in a comparable and consistent way that is relevant and accessible to the global economy.
As a result, CDP has the largest TCFD-aligned environmental database in the world, and CDP scores are widely used to drive investment and procurement decisions towards a zero carbon, sustainable and resilient economy.
The Task Force on Climate-related Financial Disclosure (TCFD) was established in 2015 by G20 Finance Ministers and Central Bank Governors within the Financial Stability Board (FSB), and its chair at the time, Mark Carney, then Governor of the Bank of England.
In March 2021, the UK Government announced a consultation on mandating TCFD disclosure not just for listed business, but large private businesses as well. The G7 have since made a public commitment to mandate TCFD disclosure. In the coming years companies will be required by Government to provide consistent and decision-useful information to market participants.
Back in 2018, CDP redesigned its climate change questionnaire to align with the TCFD recommendations. CDP’s climate change questionnaire contains over 25 TCFD-aligned questions. The full alignment mapping can be found in the CDP Technical Note on the TCFD.
These questions are contained within the Governance, Risks & Opportunities, Strategy, Targets and Emissions modules of CDP’s questionnaire and include specific methodologies for high impact sectors such as financial services, energy, agriculture, transport and materials.
CDP’s water security and deforestation questionnaires have been inspired by the TCFD recommendations and follow a similar structure, enabling companies to organize their environmental management according to similar principles of good practice. As pressure from government, investors and customers mounts, the future of TCFD reporting is broader than climate change and this guidance will prepare companies and investors for increasing environmental disclosure in future.
Since the release of the recommendations of the TCFD in 2017 CDP has seen a strong shift in the policy landscape, as well as a growing number of financial regulators and financial institutions demanding companies to disclose in alignment with the core recommendations. CDP’s TCFD insights series explores how corporates are performing when it comes to disclosing against the TCFD recommendations.
Analysis of the indexes from G7 countries and a Europe-wide Index (representing 17 European countries) reveals significant shortfalls in TCFD aligned disclosure amongst corporates. None of the indices had more than 19% of corporates achieving 100% TCFD-aligned disclosure when disclosing through CDP’s platform.
A key gap that spans across all the indices is the lack of disclosure of climate-related information and how climate issues are fed into corporate strategy. Companies continue to perform poorly in terms of risk management, suggesting that they do not have sufficient processes in place to assess and manage climate risk.
CDP will be releasing a series of deep dive pieces that explores the corporate disclosures through CDP of key indexes for the G7. Explore CDP’s initial insights that offer a high-level overview of how major indices are aligning with the TCFD recommendations.
Figure 1: Indices performance against TCFD recommendations. Cut-off date for index data is 1st September 2020 and represents only companies that disclosed through CDP's Climate Change Questionnaire in 2021