Levelling up climate risk reporting: our TCFD Reporting Comparison Tool

From this year, premium listed companies in the UK are required, by law, to disclose how they are managing climate-related threats and opportunities in their annual risk report. Our latest tool empowers members to more easily benchmark against listed companies’ approaches to climate risk disclosures, saving them time and strengthening their own methods for this kind of reporting.

Download now [Case Study]: An approach to integrating climate risk into an existing ERM framework

While the UK is the first nation in the world to require listed companies to disclose climate-related financial information in line with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD), it will likely not be the last.

Other governments around the world are making waves to introduce similar requirements in the future.

Risk leaders at the affected UK companies therefore have imminent new reporting requirements to meet; while others will want to get ahead of the curve with their own climate-related risks and opportunities’ reporting.

To support this effort, we have built the TCFD Reporting Comparison Tool to help risk managers compare how different companies and sectors are approaching the challenge of reporting climate-related financial disclosures.

Based on suggestions provided by members, and to align with the TCFD requirements’ structure, the tool – now available on our Intelligence platform – covers the following:

• Risks and Opportunities - Separated into “transition” and “physical” risks, this function enables members to see what risks and opportunities an individual company and/or sector is reporting as part of their TCFD disclosure.
• Scenarios - Organisations, such as the Intergovernmental Panel on Climate Change (IPCC), as well as individual companies, have developed climate change scenarios which are being reported against in line with TCFD requirements. Members can see which scenarios companies are using in their reporting and where they’ve been sourced from.
• Targets and Metrics - This part of the tool focuses on the goals set by different companies as part of their TCFD disclosure, and the metrics they are using to determine whether these goals have been reached.

Having an awareness of the climate-related risks other companies are focusing on, how these companies are responding to potential futures and what they are doing to make a successful green transition can empower risk leaders to bring their own organisations in line with the market.

Members have praised the tool, highlighting the time-saving and benchmarking benefits it bring them.

The tool also includes a dashboard that presents useful data points, guiding risk professionals as they prepare their own disclosures. For example, of all the FTSE 100 companies currently reporting on TCFD:

• The average number of risks mentioned per report is 6
• Only 62% of reports actually include specific risks at all
• Only 17% apply a timeframe (e.g. short-, medium- or long-term) to risks

Given that the UK requirements come into force this year, TCFD reporting is still in its early stages and there isn’t much consistency yet in how companies cover this in their annual report. Members are leveraging the tool to help shape their own TCFD reporting approach against the current backdrop of uncertainty and lack of clear guidance over how exactly they should make these disclosures.

Over time, we can expect approaches to this task to become a lot more unified as more companies report on TCFD.

As organisations’ disclosures become more consistent, we will draw out additional data points that can then be fed into the tool. As new annual reports are published, we’ll also be updating it with the latest information and evolving the tool based on member feedback and requests.

To find out more about the TCFD Reporting Comparison Tool, and how joining the Risk Leadership Network could help you and your organisation, request a demo here.