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As the number of organisations and bodies adopting it as a framework for climate-related reporting continues to grow, we observe significant variation in the style, quality and quantity of disclosures both within and across different sectors.
The finance sector has a central role to play in the transition and stands to make significant gains or losses, depending on the speed and scale of climate action. Transparent and informative disclosures are therefore of the utmost importance, not just to the organisations themselves, but to their investors, their clients and the economies in which they operate.
TCFD Performance Analyser
EY teams developed the TCFD state of play report (PDF) to further explore the variation in the standard of climate-related disclosure across the finance sector. It provides a snapshot of the current standing of select financial institutions from the Banking and Capital Markets (BCM), Insurance and Wealth and Asset Management (WAM) sectors, across all regions globally.
We evaluated the climate-related disclosures of a representative sample of financial organisations from these sectors in order to identify keys trends, best practices, and challenges relating to each of the four TCFD pillars – Governance, Strategy, Risk Management, and Metrics and Targets.
Overall, we found that the quality of disclosure across companies in the BCM sector is better than that of Insurance or WAM. This finding is in line with our expectations, as a significant number of BCM companies are publicly listed and have therefore been subject to higher investor and regulatory pressure for a longer period.
From a geographical perspective, companies that are based in the countries where regulations have been adopted earlier, such as the UK and other European states, tend to display higher quality and more detailed disclosures. This can again be explained by a high level of regulatory and stakeholder pressure. The number of climate-related standards and initiatives across Europe tend to rank much higher than that in the Americas or the Asia-Pacific region.
Unsurprisingly, our analysis showed that companies that are subject to higher public scrutiny, typically publicly listed and public interest entities, tend to publish more comprehensive disclosures. As non-financial performance rises up the agenda of different stakeholder groups, organisations are increasingly concerned with meeting the associated reporting and disclosure expectations, motivating earlier action in organisations with more external exposure.