Action is underway to achieve net-zero, 1.5°C-aligned targets. This action is transparently disclosed, communicated, and tracked to measure and manage risk across the economy.
In July, the G7 made the very welcome commitment to achieve net-zero through the introduction of mandatory corporate disclosure regimes. Looking towards the G20 in October and COP26 in November, governments must introduce high-quality mandatory disclosure regimes to ensure that both the environmental-related financial disclosure and disclosure on the impacts of economic activities on people and planet become standard business practice.
The recommendations of the Task Force on Climate-related Financial Disclosure (TCFD) have formed the basis of a wave of climate-related mandatory disclosure requirements that is currently expanding across several G20 countries and beyond. The adoption of the TCFD recommendations demonstrates a move towards more consistent reporting and collecting of environmental data which CDP has long pushed for.
However, CDP recognizes a need to strive for high-quality mandatory disclosure regulation that builds upon the TCFD recommendations, ensuring consistency in regulation across geographies, together with the high quality of the information provided. Mandatory disclosure regulation must go beyond purely financial and risk-based data (single materiality) and address the impact of companies on people and the planet too (double materiality).
Mandatory disclosure regulation must aim at environmental integrity, be designed to advance the environmental agenda and lead to real change that positively impacts people and planet. We cannot address climate change without recognizing its interconnectedness with a range of environmental practices such as deforestation, water security and biodiversity. A full economic transition requires data on a wider range of environmental topics that incorporates impact on people and planet.
Mandatory disclosure regulation must be aligned with, if not based on, existing internationally agreed standards and reporting practices. A common international baseline must be agreed. There must be an enforcement mechanism for disclosure regulation, where the implementation can be monitored and measures taken for non-compliance. Disclosure regulation should focus not only on risks, but forward-looking information, and consider temperature trajectories in order to capture the overall potential for long-term climate performance. Companies should be required to develop and disclose climate transition plans including short-, medium- and long-term targets to ensure a response to climate change with the required urgency and scale. Critically, regulation must not create a ceiling or become a tick box exercise: mandatory disclosure regulation must serve as a minimum requirement that stimulates even more ambitious reporting.
Any regulation should address not only climate, but address disclosure with a broader environmental approach: we cannot address climate change without recognising its interconnectedness with a wider range of environmental factors, including deforestation, water security and biodiversity. Nor can we address climate change through mitigation only. Long-term thinking and action around adaption and resilience needed are central to any climate action taken.
By implementing mandatory disclosure regulation, governments can drive transparency and ensure that environmental risks are managed across the economy in the transition to net-zero. CDP has created momentum and a model for mandatory disclosure. By drawing on CDP’s work over 20 years in environmental disclosure, regulators can learn from and avoid duplicating already established work, which has already prepared thousands of companies for incoming mandatory disclosure requirements.
Clear and regular disclosures allow real economy actors to track their progress and demonstrate that their commitments are being upheld. To achieve net-zero, financial institutions must also urgently decarbonise their portfolios by disclosing the broader environmental impact of their investment activities.
To accurately take stock of progress towards the Paris Agreement goals, the inclusion of all global climate action is crucial. The Global Climate Action Portal tracks progress by non-Party stakeholders, and it is vital that the Global Stocktake includes data on company, city and financial institutions’ climate action.