Insights | Article | Climate disclosures: From voluntary to mandatory reporting

Climate disclosures: From voluntary to mandatory reporting

11 August 2022

The finance industry is a key enabler of climate action. Through clear and consistent company climate disclosures the finance industry is better equipped to assess climate risk and direct capital flows to limit emissions.


Figure 1: Risks of climate change to financial institutions

Trends in TCFD reporting

  • Considering the UK and NZ’s adoption of mandatory regulation, G20 countries could follow suit to optimise on this opportunity and minimise their climate risk exposure. It will be less risky for other G20 members to implement mandatory reporting as they can learn from the implementation oversights that might happen in the UK and NZ.
  • There is a shortfall in high quality climate information. Mandatory reporting will attempt to fill this gap by increasing coverage of disclosures, for example, including other statutory requirements such as cost-benefit analysis.
  • Due to globalisation, companies could enforce a blanket policy across all operating jurisdictions to align to mandatory TCFD reporting as opposed to only reporting for their UK and NZ operations.
  • Greater alignment of reporting entities as the TCFD is now classified as the primary reporting body on climate-related disclosures. Leading to a less fragmented reporting market and allow for greater consistency, transparency, and comparability between companies (useful for regulators, shareholders, and other stakeholders).
  • Major developments and enhancements are required in the gathering, processing, and auditing information to facilitate and support the new TCFD mandatory reporting.
  • Post 2022 climate-related disclosure requirements are likely to become more progressive and ambitious.
  • TCFD predicts that by 2023 climate reporting will be more comprehensive and will have removed obstacles from the flow of information.


Related research

TCFD good practice handbook

This Task Force on Climate-related Financial Disclosures (TCFD) handbook provides examples of good practice climate-related financial disclosures across the four core TCFD elements of governance, strategy, risk management, metrics and targets from corporates across the G20.

Final report: Recommendations of the Task Force on Climate-related Financial Disclosures

This report contains the final recommendations of the Task Force on Climate-related Financial Disclosures. It includes information on climate-related risks and opportunities, scenario analysis, and guidance to support organisations from all sectors to make climate-related financial disclosures consistent with these recommendations.

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This article originally appeared in the Stockbrokers and Investment Advisers Association magazine’s April 2022 issue.