Companies Make Progress Gauging Climate Risk, But Not Enough
The number of items that each company shares information about rose to 3.6 on average in 2018 from 2.8 in 2016.
(Bloomberg) -- Companies too often make the mistake of thinking climate change is a long-term issue, but it’s actually affecting decisions today, according to a report by a global commission set to evaluate transparency into financial climate risks and opportunities.
More companies are discovering and disclosing the risks they face related to climate change, but need to do so in greater numbers and provide more transparency, according to an analysis of more than 1,100 company reports by the Task Force on Climate-Related Financial Disclosures, or TCFD. The number of items that each company shares information about rose to 3.6 on average in 2018 from 2.8 in 2016, the group found.
Bigger companies were more transparent about their assessments of climate risk. The number of companies that showed data on at least one metric suggested by the TCFD increased to 78% last year, from 70% in 2016.
Corporate responses to climate change are seen by the group as increasingly urgent, as extreme weather events, along with death, damage and disruption around the world, have brought to the fore scientists’ warnings over the last three decades.
Insurers led by Munich Re paid out $160 billion for disasters last year and are concerned that figure will grow as the climate warms and makes storms more powerful. The TCFD highlighted a 2018 report by the United Nations’s Intergovernmental Panel on Climate Change that assessed the possibility of keeping global warming below 1.5 degrees Celsius (2.7 Fahrenheit). The world has warmed about 1 degree Celsius on average since the end of the 19th century.
The TCFD authors cite the scientists call for “rapid and far-reaching transitions in energy, land, urban and infrastructure … and industrial systems.”
Companies aren’t communicating they are ready. Only 9% of companies in 2018 described the results of exercises meant to test the resilience of their business strategy through scenario analysis.
The report suggests, “companies have found this recommended disclosure to be one of the most challenging to implement.” Those responding to a TCFD survey have said that they are still learning to use the scenarios productively and marry the results to corporate strategy.
The TCFD was established in 2015 by Bank of England Governor Mark Carney, in his role as chairman of the Financial Stability Board, and published its guidelines for companies in 2017. The task force was founded and is chaired by Michael R. Bloomberg, the majority owner of Bloomberg LP.
Some 785 companies, with a combined market cap of $9.3 trillion, support the TCFD.
To contact the reporter on this story: Eric Roston in New York at eroston@bloomberg.net
To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Emily Chasan
©2019 Bloomberg L.P.