From a market perspective, Japan, South Korea, the Americas and most of Europe are all performing strongly and leading the way in terms of the quality of their disclosures. This is unsurprising, since these countries and regions can draw on several years of mandatory TCFD disclosures, which have readied companies for the ISSB’s more detailed requirements.
On the other hand, the Middle East and Southeast Asia have improved their performance compared with last year and positioned themselves for further progress but are still trailing behind. Governments have an opportunity to strengthen their climate disclosure requirements to accelerate progress. By adopting mandatory climate disclosure requirements, they can potentially change the currently low scores to a significant extent.
As for sectors, this year’s report once again highlights that those companies with the most exposure to transition risk tended to post higher scores for their disclosures, in terms of both quality and coverage. Energy tops the league for quality and coverage, though its quality performance is largely matched by financial institutions such as exchanges, other financial services providers, ratings agencies and credit bureaus, whose score has risen notably year-on-year, from 46% to 54%. In fact, quality has improved across the board, with the biggest changes seen in real estate, mining, agriculture, and materials and building, as well as financial institutions. The shift in scores comes from stakeholders, such as regulators and investors including financial institutions, putting pressure on businesses in carbon intensive sectors to disclose their decarbonization plans and progress. From the point of view of financial institutions, funding drives the bulk of their businesses, and investors are putting pressure on them to reduce their brown lending.