Overall for the industry, disclosures around management’s role in assessing and managing climate-related risks and opportunities was slightly better than disclosures around the oversight of the board. Leading organizations also disclosed links between compensation and the success of various aspects of the company’s climate-related strategy.
Strategy is the weakest pillar in the energy industry for the second consecutive year, although a marked difference was noticeable between the leaders and the laggards.
Some of the best-performing companies in the industry presented the risks and opportunities to their business, with an attempt to quantify some of the easier-to-measure impacts, such as carbon pricing schemes.
Using scenario analysis to identify climate risks and opportunities was still limited to the larger energy companies. Less than 8% of the sample provided high-quality disclosures on the resilience of their business strategy against different climate futures, including a 2°C or lower scenario, where significant transition risks need to be assessed.
High-performing companies in the industry disclosed details of the scenarios studied. Many of these companies used an international scenario published by the International Energy Association (IEA) or world energy demand models published by energy companies as a starting point. However, disclosure on the potential impact of the more extreme scenarios, especially in financial terms, was still very limited.
One emerging practice is the involvement of stakeholders in the development and understanding of scenarios for the companies. This seems to have a dual purpose of informing the scenario analysis process and developing a common understanding of the issues with key stakeholder groups, making dialogue more constructive.