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Webinar slides: Are we headed towards mandatory climate reporting?
The document discusses the potential move towards mandatory climate-related financial disclosures, referencing the Task Force on Climate-related Financial Disclosures (TCFD) and its recommendations for companies to report their climate risks. It highlights global support for TCFD, with examples from various countries, and suggests frameworks for integrating climate reporting into national legislation. The emphasis is on creating decision-useful, comparable disclosures to enhance market resilience and drive sustainable economic growth.
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Webinar slides: Are we headed towards mandatory climate reporting?
- 1. September 19 |Tweet @CDSBGlobal Jennie Gleed, Senior Policy Manager, CDP Are we headed towards mandatory climate disclosure? Michael Zimonyi, Policy and External Affairs Director, Climate Disclosure Standards Board (CDSB)
- 2. September 19 |Tweet @CDSBGlobal Board Technical Working Group (examples) To provide decision-useful environmental information to markets via the mainstream corporate report
- 3. CDP is aglobal environmental impact non-profit working to secure a thriving economy that works for people and planet. 3 ABOUT CDP Name | @Twitter Information is the fundamental basis for action. We help investors, companies and cities to measure, understand and address their environmental impact. We aim to make environmental reporting mainstream and provide detailed insights to drive action for a climate safe, water secure, deforestation free world.
- 4. September 19 |Tweet @CDSBGlobal 4 TCFD recommendations 4 Overview 1. Voluntary 2. Report climate-related financial disclosures in the annual financial filings (mainstream report) 3. Financial sector & high risk non-financial sectors 4. Transition risks & physical risks (and opportunities) 5. Scenario analysis & forward-looking information 6. Short-term, medium-term & long-term 7. Qualitative & quantitative disclosures Governance Strategy Risk Management Metrics and Targets Are we headed towards mandatory climate disclosure?
- 5. TCFD recommendations asCDP metrics Turning guidelines into metrics for investor evaluation 5 TCFD recommendations What investors and companies should be evaluating. CDP questions Breakdown of recommendations into accessible, actionable metrics CDP guidance How to provide complete, comparable information for each question. Resources to take action on metrics. CDP scoring What is best practice for each metric. CDP data Comparable, standardized, decision-useful
- 6. September 19 |Tweet @CDSBGlobal Are we headed towards mandatory climate disclosure? 6 TCFD implementation Creating consistent, comparable and decision-useful climate- related financial disclosures CDP helps companies generate, report and structure their data. CDSB helps companies integrate the financially material information into their mainstream reports. TCFD promotes better decision-making, enhanced market resilience and more sustainable economic growth.
- 7. September 19 |Tweet @CDSBGlobal Support for TCFD Are we headed towards mandatory climate disclosure? 7 825 supporters globally, responsible for assets of $118 trillion. • Belgium • Brazil • Canada • Chile • European Union • France • Ghana • Hong Kong • Japan • Netherlands • New Zealand • Singapore • Sweden • United Arab Emirates • United Kingdom Government support:
- 8. Avenues for inclusionof the TCFD recommendations into national legislation in G7 jurisdictions 8 @CDP Roadmap for adopting the TCFD recommendations
- 9. September 19 |Tweet @CDSBGlobal France Are we headed towards mandatory climate disclosure? 9 Article 173 of Energy Transition and Green Growth Law requires financial stakeholders to publish information on how ESG criteria, particularly concerning climate risks, are taken into account. Only minor adjustments to existing French reporting practices would be required, such as Article 173 of the Energy Transition and Green Growth Law, to align French legislation with the TCFD recommendations.
- 10. September 19 |Tweet @CDSBGlobal Japan • Highest number of TCFD supporters • Position Japan as leader in TCFD implementation • TCFD Coalition • Collaboration with other financial centres globally • Strong involvement by – Japan Financial Services Agency – Ministry of Economy, Trade and Industry – Japan Exchange Group Are we headed towards mandatory climate disclosure? 10
- 11. September 19 |Tweet @CDSBGlobal UK Are we headed towards mandatory climate disclosure? 11 The UK government has set out its expectation for all listed companies and large asset owners to disclose in line with the TCFD recommendations by 2022, in it’s recently released UK Green Finance Strategy. Updates to implement TCFD UK could align legislation by strengthening the 2013 & 2017 amendments to the Companies Act 2006 to incorporate recommended disclosures of the TCFD recommendations in Directors Reports and/or Strategic reports.
- 12. September 19 |Tweet @CDSBGlobal Canada • CSA Staff Notice 51-358: Reporting of Climate Change- related Risks • Final Report of the Expert Panel on Sustainable Finance – 5.1. Endorse a phased ‘comply-or-explain’ approach to adoption of the TCFD framework in Canada. Updates to implement TCFD • Canadian Business Corporation Act; and/or • NI 51-102 Continuous Disclosure Obligations & NI 58-101 Disclosure of Corporate Governance Practices; • CSA Staff Notice 51-333 Environmental Reporting Guidance to incorporate TCFD recommendations. Are we headed towards mandatory climate disclosure? 12
- 13. September 19 |Tweet @CDSBGlobal USA Are we headed towards mandatory climate disclosure? 13 Regulation S-K already requires listed companies to provide disclosures on items including: Description of business Legal proceedings Risk factors Management’s discussion and analysis Updates to implement TCFD The Securities and Exchanges Commission provides guidance regarding climate change related disclosure, but enforcement of this has not yet been a priority for the SEC.
- 14. September 19 |Tweet @CDSBGlobal EU • Non-Financial Reporting Directive provides basis for TCFD • EC Guidelines on reporting climate-related information • Commission would be “surprised” if Non-Financial Reporting Directive was not reopened • EFRAG Project Task Force on Climate-related Reporting Are we headed towards mandatory climate disclosure? 14 Updates to implement TCFD Art. 19a and 29a of NFR Directive (2014/95/EU) and article 20 of Directive 2013/34/EU with TCFD recommendations. European Securities and Markets Authority (ESMA) and Member State National Competent Authorities provided with the jurisdiction and funding to supervise ESG reporting.
- 15. September 19 |Tweet @CDSBGlobal Australia AASB Practice Statement on Climate-related and other emerging risks disclosures • asset impairment; • changes in the useful life of assets; • changes in fair valuation of assets due to climate-related and emerging risks; • Chenge in costs and/or demand for products & services affecting impairment • Provisions and contingent liabilities arising from fines and penalties; and • Vhanges in expected credit losses for loans and other financial assets. ASIC – climate change is ’systemic risk’ • Regulatory Guide 228 Prospectuses: Effective disclosure for retail investors; • Regulatory Guide 247 Effective disclosure in an operating and financial review Are we headed towards mandatory climate disclosure? 15
- 16. September 19 |Tweet @CDSBGlobal New Zealand Productivity Commission recommendations – Aug 2018 R7.4 The Government should implement mandatory (on a comply or explain basis), principles-based, climate-related financial disclosures by way of a standard under section 17(2)(iii) of the Financial Reporting Act 2013. These disclosures should be audited and accessible to the general public. Government response – Aug 2019 The Government agrees... To achieve this further consideration is required in relation to the following matters: 1. Whether the Financial Reporting Act is the most appropriate means for implementing climate-related disclosure requirements. 2. Consideration of the classes of entities the disclosure requirements should apply to. Subject to consultation, the Government considers that listed issuers, registered banks and licensed insurers should be covered. It is less clear whether any other classes of entities should also have climate-related disclosure requirements. 3. What, specifically, the disclosure requirements should require entities to disclose and whether the disclosures should be different for different classes of entity. Are we headed towards mandatory climate disclosure? 16
- 17. September 19 |Tweet @CDSBGlobal Chile • Chilean Sustainable Finance Public-Private Working Group • Sector-specific transition plans for key sectors (EY Chile) • Mandatory climate change requirements – Norma de Carácter General n°30; – Delivering complete, consistent and decision-useful information to investors; – Public consultation in “next few weeks” “So far climate change hasn't been a relevant topic in the agenda of our financial markets but this has to change.” – Joaquín Cortez, CMF Are we headed towards mandatory climate disclosure? 17
- 18. September 19 |Tweet @CDSBGlobal Are we heading towards mandatory disclosure? • Other jurisdictions, e.g.: China • Not “if”, but “when” and “who” • Evolution, not revolution – small tweaks & enforcement • TCFD must remain focal point • Paris Agreement Are we headed towards mandatory climate disclosure? 18 cdsb.net/G7
- 19. September 19 |Tweet @CDSBGlobal Questions? Michael.Zimonyi@cdsb.net Policy & External Affairs Director CDSB @CDSBGlobal cdsb.net Jennie.Gleed@cdp.net Senior Policy Manager CDP @CDP cdp.net
Editor's Notes
- #3 Nadine: The Climate Disclosure Standards Board is a consortium of 9 environmental and business NGOs. We were set up in Davos in 2007 with a mission to create the enabling conditions for material climate change and natural capital information to be integrated into the mainstream report.
- #4 DO NOT EDIT THESE SLIDES – DELETE IF NOT RELEVANT/NEEDED
- #5 What makes the TCFD different?
- #7 What the outcome of the TCFD is – improve decision-making (by investors, lenders and insurers in allocating capital and underwriting risk), enhance market resilience and more sustainable economic growth. Also to ensure more stable, resilient markets over the medium and long term by facilitating a smoother transition—with less abrupt price adjustments—to a lower-carbon and climate-resilient economy.
- #9 DO NOT EDIT THESE SLIDES – DELETE IF NOT RELEVANT/NEEDED
- #13 Previous environmental reporting Staff Notice unsuccessful Final Report of the Expert Panel on Sustainable Finance 5.1. Endorse a phased ‘comply-or-explain’ approach to adoption of the TCFD framework in Canada. 5.2. Provide clarity to issuers on the recommended scope and pace of TCFD implementation. 5.3. Work with federal, provincial and industry partners to clarify the materiality of climate-related financial disclosures. Canadian Business Corporation Act, Part XIV Financial Disclosure is updated with requirements for financial statements to include environmental disclosures; and/or Updates to National Instrument 51-102 Continuous Disclosure Obligationsii and National Instrument 58-101 Disclosure of Corporate Governance Practices. Updates to CSA Staff Notice 51-333 Environmental Reporting Guidanceiv to incorporate TCFD recommendations
- #16 AASB Practice Statement on Climate-related and other emerging risks disclosures asset impairment; changes in the useful life of assets; changes in the fair valuation of assets due to climate-related and emerging risks; increased costs and/or reduced demand for products and services affecting impairment calculations and/or requiring recognition of provisions for onerous contracts; potential provisions and contingent liabilities arising from fines and penalties; and changes in expected credit losses for loans and other financial assets.
- #18 MESA-LAB PÚBLICO-PRIVADA DE FINANZAS SOSTENIBLES EN CHILE defining a long term agenda of dialogue and joint efforts between the government, Finance Ministry, central Bank of Chile, regulators like the Pensions Authority and our Commission for the Financial Markets, AND other financial institutions belonging to the private sector. The objective is to incorporate the risks and opportunities of climate change in business strategies and investment decisions aligned with the recommendations of the working group of the Financial Stability Council of G20 about voluntary climate-related financial disclosures. The Ministers and Advisors of the Comision para el Mercado Financiero (CMF) are in the final phase of a project that contemplates changes to the Norma de Carácter General n°30. These changes focus on tweaking the requirements of information related to social responsibility and sustainable development that corporations currently disclose in their annual report. The new requirements are aimed at delivering complete, consistent and decision-useful ESG information to investors so that they can incorporate this into their decision making. This will also help organisations become more resilient and sustainable in the long term.