Companies are investing more and more time in producing climate-related disclosures, which are increasingly based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Yet their disclosures are still not translating into practical strategies to accelerate decarbonization. Why is that? This is the issue explored by the fourth EY Global Climate Risk Barometer (pdf), a comprehensive analysis of disclosures made by more than 1,500 companies across 47 countries.
These insights form part of the EY CFO Imperative Series, which provides critical answers and insights to help finance leaders reframe the future of their organization.
Coverage and quality are increasing, but gaps remain
The research, which was based on a robust scoring methodology, found that of the corporate reports analyzed, the score for coverage of TCFD recommendations was 84%, a steep increase from 70% in 2021. While coverage scored highly, the average score for quality was just 44%, a minimal increase from last year’s score of 42%. The wide gap between coverage and quality suggests that, while more companies are reporting on climate risk, they are not actually providing meaningful disclosures around the challenges they face.
Interestingly, one element of the TCFD framework that showed a marked improvement in quality of disclosures this year was strategy, with the average quality score for strategy climbing to 42% from 38% in 2021. This result likely reflects companies’ awareness of the changing political and regulatory landscape around disclosures. For instance, the first two proposed standards for sustainability disclosures from the International Sustainability Standards Board (ISSB) both feature strategy as an important component.