Two-thirds (67%) of UK corporates will be disclosing climate-related risks and opportunities in their 2019 annual reporting, according to new figures released today by the Carbon Trust. However, fewer than a quarter (23%) of companies are expecting to fully report in line with the recommendations of the G20 Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), released in June 2017.
The survey was conducted by Ipsos MORI as part of its annual Captains of Industry research study, based on interviews with 100 board members from the UK’s top 500 companies.
The release of these findings comes just one week after the World Economic Forum highlighted extreme weather events and the failure of climate change mitigation and adaptation as the top risk faced by the world in 2019.
Looking across a time frame of the next three years, the most commonly expected advantage from climate change disclosure in line with the TCFD recommendations is reputational, with seven in ten (72%) believing that this reporting would increase brand value.
At an aggregate level, one third (31%) of respondents see financial benefits, which is composed of improved access to capital (12%), lower cost of capital (10%), and strengthened credit rating (9%).
Other perceived benefits include reduced shareholder pressure or activism (37%), as well as attracting an increased diversity of investors (29%). And one-fifth (21%) of business leaders think that improved climate change reporting will directly result in an increased company valuation.
Conversely, very few respondents foresee negative impacts from revealing their climate change opportunities and risks, with only a handful predicting this would have any effect on investment or borrowing. Three-fifths (59%) do not identify a single disadvantage that would occur for their company in the short-to-medium term by providing disclosures in line with the TCFD recommendations.
It is also of note that despite high profile media coverage of the TCFD recommendations – as well as pledges of support from many of the world’s largest institutional investors, banks and rating agencies – six in ten (62%) corporate leaders say they have not been engaged by any of their important investors or other stakeholders over the past year around improving disclosures on climate-related opportunities and risks.
We are now able to see how our changing climate is moving markets more quickly than many had anticipated. Incidents of extreme weather are increasing, the adoption of clean technology is accelerating, and more customers are changing their behaviour. For corporate leaders, going through the process of assessing their company’s climate change opportunities and risks is a vital strategic tool for navigating the necessary transition to a sustainable, low carbon economy.
Hugh Jones, Managing Director – Business Services, at the Carbon Trust
It's disheartening to see that so few large institutional investors are asking UK plc to come clean on their climate credentials. These data are essential to encourage companies to become climate-safe investments. Investors owe it to their clients and the millions of workers whose savings they are investing to protect us from loss that is greater than just financial.
Anne-Marie Williams, Investor Engagement Manager at ShareAction
Climate change has significant consequences for virtually every sector of the economy. It’s a topic business leaders can’t afford to ignore, and while it’s rising-up the corporate agenda, there is still a way to go. Reporting on climate-related risks is an essential step to identifying challenges and grasping opportunities to be found in the transition to a low-carbon economy. Many business leaders already recognise this is the case, understanding the financial and reputational benefit it can help unlock. It’s incumbent on others to follow suit and investors play a key role in ensuring this happens.
Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change, representing over 160 investors with over £20 trillion in assets
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About the research
This research was conducted on behalf of the Carbon Trust by Ipsos MORI, as part of the Captains of Industry survey. The study is one of the longest running studies of senior business people in the UK, having been undertaken every year since 1981.
Ipsos MORI conducted 100 interviews with board members from the top 500 companies by turnover and the top 100 by capital employed in the UK. Participants were Chairmen, Chief Executive Officers, Managing Directors/Chief Operating Officers, Financial Directors or other executive board directors. Interviews were primarily carried out face to face (6 were carried out over the telephone) between October and December 2018.
About the Carbon Trust
Established in 2001, the Carbon Trust works with businesses, governments and institutions around the world, helping them contribute to, and benefit from, a more sustainable future through carbon reduction, resource efficiency strategies, and commercialising low carbon businesses, systems and technologies.
The Carbon Trust:
- works with corporates and governments, helping them to align their strategies with climate science and meet the goals of the Paris Agreement;
- provides expert advice and assurance, giving investors and financial institutions the confidence that green finance will have genuinely green outcomes; and
- supports the development low carbon technologies and solutions, building the foundations for the energy system of the future.
Headquartered in London, the Carbon Trust has a global team of over 30 nationalities based across five continents.
About the Task Force on Climate-related Financial Disclosures
The Task Force on Climate-related Financial Disclosures (TCFD) was convened by the G20’s Financial Stability Board to explore how climate change could pose a risk to the global financial system.
Led by Michael Bloomberg, the TCFD released its final recommendations in June 2017, setting out a clear and consistent structure for companies to disclose information related to how climate change will affect their business.
The recommendations advise companies to strengthen reporting around two separate dimensions of opportunities and risk:
- the impact of a changing climate, such as rising sea levels and more frequent or severe incidents of extreme weather; and
- the transition risk faced by companies in the shift to a lower carbon economy, which may include policy and regulatory changes, disruptive technologies and a shift in consumer demand.
Since its release, more than 500 major organisations around the world have expressed support for the adoption of the TCFD recommendations, including many of the world’s largest listed companies, asset managers, pension funds, insurers, banks, ratings agencies and accounting firms.
About Climate Action 100+
Climate Action 100+ is an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change. More than 300 investors with over US$32 trillion in assets collectively under management are engaging companies on improving governance, curbing emissions and strengthening climate-related financial disclosures. The companies include 100 ‘systemically important emitters’, accounting for two-thirds of annual global industrial emissions, alongside more than 60 others with significant opportunity to drive the clean energy transition.
Launched in December 2017, Climate Action 100+ is coordinated by five partner organisations: Asia Investor Group on Climate Change (AIGCC); Ceres; Investor Group on Climate Change (IGCC); Institutional Investors Group on Climate Change (IIGCC) and Principles for Responsible Investment (PRI). These organisations, along with five investor representatives from AustralianSuper, California Public Employees’ Retirement System (CalPERS), HSBC Global Asset Management, Ircantec and Manulife Asset Management, form the global Steering Committee for the initiative. For more information, visit: www.ClimateAction100.org and follow: @ActOnClimate100.