The telecommunications and technology sector was not identified as a key sector by the Task Force on Climate-related Financial Disclosures (TCFD). However, it has emerged as a leading sector based on the analysis of the 2019 EY Global Climate Risk Disclosure Barometer. The sector achieved the fifth best scores of the 11 sectors analyzed, in terms of both coverage and quality of the TCFD recommendations. Each of the companies that were reviewed as part of the analysis, received a score from EY for the coverage and quality metrics on the basis of how they addressed or implemented all of the 11 recommendations by the TCFD.
On average, companies within our sector sample covered just over half of the TCFD recommendations, with 20% of the companies assessed covering more than 80% of those recommendations. Companies performed particularly well in terms of the targets and metrics area of the recommendations.
The telecommunications and technology sector obtained an overall quality score of 28% — by comparison, the two leading sectors: energy and transport, each achieved an overall quality score of 36%. The quality of disclosures related to climate targets and metrics was also higher than the quality of disclosures of the other TCFD components, with one-third of the assessed companies having achieved a quality score greater than 60% for this area. Companies that responded to Carbon Disclosure Project (CDP) obtained better scores overall when compared with those who didn’t.
The top-performing markets for this sector included Australia, Spain, the Netherlands, Belgium and Germany. This is likely because of the regulations in place for this sector in these markets.
Companies in markets including Indonesia, Kazakhstan, Russia, Saudi Arabia, the UAE and China were identified as poor performers according to our scoring methodology, as they did not disclose any information aligned with the TCFD recommendations. To a lesser extent, markets in Argentina, Ireland and the Philippines also scored close to 10% or less in terms of the quality of their climate disclosures.
We examined how the telecommunications and technology sector performed against the four areas, through which the TCFD recommendations are structured.
Approximately half of the assessed companies did not provide any disclosures related to governance, resulting in an average coverage score and a low score for quality when compared to the entire sample.
One-third of the assessed companies provided disclosures on the responsibilities of the board (e.g., corporate social responsibility (CSR) committee), and the internal process for reporting climate-related risks and opportunities to the board for review. However, most of the companies did not provide detailed information on management’s role in assessing, monitoring and managing both existing and emerging climate-related risks and opportunities.
One company stood out as a sector leader as it provided a more detailed description of management’s role in assessing and managing climate-related risks and opportunities. The structure for climate-related management was clearly explained, and the management’s process for monitoring and reviewing both current and emerging climate-related issues was clearly articulated. The company also included the topics discussed in management meetings and the frequency of such meetings.
Just over half (55%) of the assessed companies reported information about their climate-related risks and opportunities. Of those companies, 35% disclosed both physical, and transition risks and opportunities (e.g., regulations, extreme weather and low emission services) with stated time horizons and financial impacts. However, the identified impacts were rarely related to the overall business strategy and more often presented as stand-alone impacts. It is important to note that companies identified a large number of climate-related risks and opportunities that were only disclosed within the CDP, and not within annual financial or CSR reports.