Will the steady increase in TCFD disclosures continue in Asia?
The Task Force on Climate-related Financial Disclosures (TCFD), established by the Financial Stability Board (FSB) established following its recommendations in 2017, reported in October 2022 that progress is continuing to be made globally, but Asia is still lagging behind.
The Task Force reviewed publicly available reports of over 1,400 companies from eight industries and five regions to better understand current climate-related financial disclosure practices and their evolution, with TCFD recommending 11 disclosures.
Happily, the average number of recommended disclosures addressed per company has steadily increased each year for the past five years — from 1.4 in 2017 fiscal year reporting to 4.2 in 2021 fiscal year reporting.
However, while 80% of companies disclosed in line with at least one of the TCFD-recommended disclosures for fiscal year 2021, only 43% disclosed in line with at least five.
Despite over half of companies in the Asia Pacific region disclosing climate-related metrics, the region averaged 36% reporting across all 11 recommended disclosures—an increase of 11 percentage points since 2017.
However, when compared to North America and Europe, Asia is still falling behind. European companies reviewed disclosed at 60% on average across the 11 recommended disclosures for 2021 reporting, growing 23 percentage points since 2019.
And North America, over 60% of North American companies disclosed climate-related risks or opportunities and 45% disclosed their impacts, despite a low level of overall disclosure at just 29%.
And the momentum is growing. Over 3,900 organizations have now pledged their support for the TCFD, growing from over 2,600 supporters when the Task Force released its 2021 status report, spanning 101 countries covering nearly all sectors of the economy, with a combined market capitalization of $26 trillion.
“While we are proud of the progress we’ve seen since 2017 in company disclosures, and in the adoption of TCFD by governments, standard setters and regulators, these findings make it clear there is more work to be done to improve transparency as companies and investors assess their risks through the lens of climate change,” Mary Schapiro, Head of the TCFD Secretariat and Vice Chair for Global Public Policy at Bloomberg L.P.
The next report is due in October 2023. Asia has a huge opportunity to take the lead in Climate-Related risk management, but there is more work to be done to improve transparency as companies and investors assess their risks through the lens of climate change.
Only then will we see the true picture.