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How the energy industry is leading on climate-related disclosures

The energy industry remains one of the best performers with its disclosures of climate-related risks.

In brief

  • The energy industry remains one of the best-performers for the coverage and quality of climate-related financial disclosures. 
  • The top-performing companies in the energy industry are predominantly from Europe.
  • Companies from Australia remain strong performers even when faced with increased pressure from regulators and potential new legislation.

Analysis of the 2019 EY Global Climate Risk Disclosure Barometer showed that the energy industry was again one of the best-performing industries in terms of both quality and coverage for Task Force on Climate-related Financial Disclosures (TCFD) recommendations, when compared with 2018. This is not surprising given that the companies assessed include major oil and gas organizations and utilities who have been challenged for some time now by investors and society on their exposure to climate risk. Each of the companies that were reviewed received a score for the coverage and quality metrics on the basis of how they addressed or implemented all of the 11 recommendations by the TCFD.

  • The top-performing companies were predominantly from Europe — namely Spain, France, Italy and the UK. This is likely driven by a combination of factors, including the price increase in the European Union Emission Allowances and the growing focus among the financial community (banks and investors) to increase capital allocation to green projects. Additional factors include the momentum created by the implementation of the European Union Directive 2014/95 on non-financial and diversity information (the NFI Directive). The implementation of this directive requires listed companies to include environmental, social and governance (ESG) information in their corporate reports.

  • Companies from Australia continued to be strong performers in the face of increased pressure on climate risk disclosure from regulators and possible upcoming legislation. Companies from South Africa and the US were also among the good performers.

  • Although a specific framework for reporting climate risk has not yet emerged in the US, the three companies included in the sample all faced shareholder resolutions requesting increased disclosure. These companies produced a climate resilience report in some form, though not all reported to the Carbon Disclosure Project (CDP) as well.

  • In some markets where renewable energy companies were included in the sample, the quality of disclosures did not result in higher scores compared to their fossil fuel-based counterparts. This suggests that those companies could increase their competitive advantage by sharing more about the resilience of their business strategies, assuming their internal assessments confirm their perceived strengths.

  • The 2019 sample included some new large oil-producing markets. Although the disclosure scores for these new entrants was low, this likely reflects the lack of company and shareholder focus on climate risks and opportunities, despite the relatively high carbon intensity of their markets.

EY teams examined how the energy industry performed against the four areas, through which the TCFD recommendations are structured.


In certain markets containing leading energy organizations, there was close to full coverage of the TCFD’s governance recommendations. The quality score was just over 60% however, showing that even the leaders have opportunities to improve how they manage climate risk internally. For example, presenting organizational charts from the board down, with specific responsibilities described.

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.

Risk management

Disclosures under risk management scored marginally higher than those for the strategy pillar. Companies appeared to be more comfortable describing their approach to managing climate-related risks. Many disclosed the integration of climate-related risks into the company’s generalized enterprise risk management process. However, the quality scores remained low. Only a few companies adequately demonstrated that their risk identification processes were robust enough to fully capture the full scope of transition and physical risks that could affect their business strategy. 

The energy industry is the highest scoring industry when it comes to risk management (alongside transport) however, which is not surprising given how central the issue is to core business.

Targets and metrics

Almost a quarter of companies in the energy industry remained silent on their scope 1 and 2 emissions. For the energy industry, it was also expected that companies would be discussing both upstream and downstream scope 3 emissions, no matter where they are positioned on the energy supply chain. Remarkably, less than one-third of companies got top score on that TCFD recommendation.

Some of the best-performing companies in the industry have started to disclose metrics around investments in low carbon technology, the effectiveness of carbon capture technologies, targets to phase down fossil-fuel generated electricity, and ways that internal carbon price is used in decision-making. These metrics are being seen across multiple forms of reporting, including a company’s annual report.


The energy industry remained one of the best-performing industries in terms of both quality and coverage of disclosures. This is not surprising given the industry’s exposure to climate risk and the continued pressure from both investors and the wider public. This article draws on analysis from the 2019 EY Global Climate Risk Disclosure Barometer and provides a snapshot of the energy industry’s uptake of the recommendations by the TCFD.

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