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Climate disclosures continue to improve. But will that be enough to deliver on net-zero commitments and meet imminent regulatory obligations?
In brief
More than three quarters (77%) of the companies featured disclosed a net zero strategy, transition plan or decarbonization plan.
Organizations that disclosed a specific net-zero strategy or decarbonization plan had quality scores 5% higher than Canadian average.
Almost half of the companies featured (41%) engaged in qualitative scenario analysis, while almost all (94%) performed climate risk analysis.
Canadian organizations are making good progress on climate-related risk disclosures. But according to a new report by EY, if they don’t accelerate their efforts, they could be left out in the cold as regulatory requirements heat up in support of 2050 net-zero targets.
According to EY’s fourth Global Climate Risk Disclosure Barometer, few companies appear to have acknowledged the depth of change needed to align operations with their climate change commitments. And even fewer have developed practical transition plans to get them there.
The annual barometer analyzes the climate-related disclosures of more than 1,500 organizations in 47 countries. Findings are then measured against a framework of 11 recommendations developed in 2017 by the Task Force on Climate-Related Financial Disclosures (TCFD) to improve reporting of climate-related financial information. Scores are assigned based on coverage of the recommendations — whether there is information presented for each of the recommendations — and on the extent to which a company’s disclosure meets outlined expectations (quality).
Climate change is on the agenda
This year’s global findings showed year-over-year increases across both scores, with coverage of climate disclosures up 14% over 2021 to 84%, and quality scores experiencing a modest hike from 42% to 44%. But while companies appear to be embracing the TCFD recommendations, we’re learning that disclosures are not as comprehensive as investors and regulators would like them to be. And with global energy-related carbon dioxide emissions up 6% in 2021, it’s clear that companies aren’t taking the holistic view of climate change risks and opportunities required to translate them into practical strategies and advance the decarbonization agenda as originally anticipated.
Only 29% of the companies assessed reported the impact of climate change in their financial statements, and the data shared was mostly qualitative. With many around the world implementing mandatory guidelines around disclosure requirements and investors clamouring for transition plans, the pressure is on.
Canadian organizations are making good progress on climate-related risk disclosures. But according to a new report by EY, if they don’t accelerate their efforts, they could be left out in the cold as regulatory requirements heat up in support of 2050 net-zero targets.
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