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Media round up of TCFD recommendations

written by Joel Kenrick

Carney’s CEO Club Gives $3.3 Trillion Muscle to Climate Fight: reads the Bloomberg headline. 'Companies with a combined market value of more than $3.3 trillion -- equivalent to all the goods and services produced annually by Germany -- threw their weight behind Carney’s final report on climate change published on Thursday.' The story notes that 'Stockholders are overruling corporate boards on the environment in record numbers at annual meetings this year. They’ve supported to climate change proposals at companies such as Exxon Mobil Corp., PPL Corp. and Occidental Petroleum Corp. ... Since the FSB’s draft report in December, the panel expanded recommendations on executive pay, urging all companies to link compensation to performance on climate-related topics. It says all organizations that see climate-related risk as “material” should tell investors if they include environmental targets in pay criteria. (Carney’s CEO Club Gives $3.3 Trillion Muscle to Climate Fight, 29 June, Bloomberg). Bloomberg also carry a TV interview with Mark Carney (BOE Governor Mark Carney on Climate Change).

Growing demand from investors for climate-related financial information: Reuters note that "there are concerns in the financial community that assets are being mispriced because the full extent of climate risk is not being factored in, threatening market stability. As a result, demand is growing from investors, shareholders, lenders, underwriters and the public for more meaningful and transparent climate-related financial information." (G20 task force issues framework for climate-related financial disclosure, Reuters). In a separate story Investors are slowly starting to push companies to fight climate change they report on a survey of '13 leading public and corporate pension schemes in Europe, Asia and North America managing a total $1.1 trillion said they were committed to engaging firms on their climate strategy. Three ...said explicitly that divestment was an option if talks were unsatisfactory.'

Global companies pledge transparency, Shell only oil company: AFP write 'Industrial powerhouses such as Unilever, Dow Chemical Company, Tata Steel and PepsiCo have also backed the move towards climate transparency, along with the "Big Four" professional services giants, and ratings agencies Moody's and S&P Global. Royal Dutch Shell is, so far, the only oil and gas company to tender its support.' They note 'the fossil fuel industry is especially vulnerable to questions about climate risk as the race to decarbonise the world economy gathers pace. A report released earlier this week found that, on average, 30 percent of investments planned by 69 oil and gas majors over the next decade - worth more than $2 trillion - could be wasted if the world economy retools to cap global warming at two degrees Celsius.' (Global companies pledge transparency on exposure to climate change risk, AFP). Natural Gas World and UPI also cover Shell's support, with the former noting 'some companies have come under fire for not facing up to the fact that they might not ever produce all their booked reserves of oil and gas at any price. Writing down reserves could hurt their share price.'

G20 cracks whip on climate risk for the fossil industry, report The Daily Telegraph. "The G20’s super-regulator has called for sweeping new disclosures on climate risks, warning that up to $43 trillion of assets could ultimately be at risk for the fossil-fuel industry and a raft of other companies exposed to global warming" writes International Business Editor Ambrose Evans Pritchard.

'Climate-change risks have become an increasingly mainstream concern for financial institutions and big companies, which see both a real menace from global warming and a regulatory threat from governments seeking to lessen its impact', according to the Wall Street Journal. The 100 CEO's support is 'the first sign of a major shift in market sentiment following the publication of new disclosure guidelines from the international Financial Stability Board (FSB)'sayBusiness Green. In an analysis article they ask 'Will the new TCFD disclosure guidelines change how companies think about climate risk?', with Jane Stevenson, CDP, answering it will create buzz "because the Task Force is an exclusively business-led group of individuals representing global commercial organisations. They represent a very substantial driver of global economies."

Global coverage includes:

  • Canada: "The Canadian government is "supportive" of the task force's work, said Chloe Luciani-Girouard, spokeswoman for Finance Minister Bill Morneau. She noted that Canadian securities regulators are reviewing climate-change disclosure, including the Bloomberg report's recommendations. "We look forward to the outcome of this process," she said. (Globe & Mail)
  • Europe: few companies disclosing, Commission expert group at work: 'In Europe, few companies have taken the step to disclose their exposure to climate risk, however. A survey by the WWF of the 80 largest asset owners in Europe showed that only 30 agreed to disclose their data. … Similar efforts are underway at European level. In December, the European Commission set up a High Level Expert Group  on sustainable finance (HLEG SF) to work on climate-related financial disclosure and other sustainability reporting recommendations. The group is expected to conclude its work in December.' (EuractivIPE report "Philippe Zaouati, CEO of Mirova, saying [the European Commission’s HLEG SF will recommend integrating the TCFD’s disclosure recommendations in EU regulation when it presents its interim report in just over a week."
  • Italy: Busines daily ilSole24 notes even if Trump is not interested in climate risks "the world of economics and finance has no intention of closing their eyes. ... [companies backing the TCFD findings include] two oil companies, Royal Dutch Shell and the Italian Eni, several mining giants (including Barrick Gold, Bhp Billiton and Vale, but not Rio Tinto) and utilities, including Enel. Under the Italian flag there is also Borsa Italiana, … part of the London Stock Exchange."
  • Australia: 'Australia’s largest listed companies, including Woodside, Rio Tinto and Santos, are likely to face sweeping changes to the way in which they model, plan for and disclose risk from climate change to investors. How they respond will affect their ability to attract funding from lenders, insurers and superannuation funds who are under pressure to stress-test investments for a carbon-constrained future' report The Guardian (3 July). 
  • Japan: NHK national broadcaster reported that the Ministry of Environment will encourage domestic companies to actively disclose information (NHK, in Japanese)

Mandatory regulation calls: Writing in RI, TCFD member, Steve Waygood, from Aviva, says: "We are sceptical that voluntary disclosures will get us far enough, fast enough to effectively combat climate change; research shows it is only when governments mandate disclosure that it becomes widespread, consistent and comparable." He highlights need for:

  • 'the International Organisation of Securities Commissions to change its listing rules to promote climate-related disclosure';
  • 'the Organisation for Economic Cooperation and Development update its Principles of Corporate Governance to make clear it is the responsibility of company boards to govern long-term risks, including climate change.'
  • "credit-ratings agencies [to] include climate-related measures in their assessments' if the TCFD recommendations are to gain sufficient traction. (3 July, Responsible Investor ($)). 

The Guardian report that 'Over the next year, the TCFD would work to monitor and assist companies implementing their recommendations' and quote TCFD member Yeo Lian Sim, from Singapore Stock Exchange, saying that "although the recommendations were made as a voluntary code for which there is a compelling business case to adopt" ... "they might one day become regulated for in some economies if they are widely adopted." In the UK, The Aldersgate Group’s executive director Nick Molho told Edie: “Given the UK’s aim to become a hub for green finance, the government should take note of the ambition of these recommendations and strengthen the breadth and scope of its own mandatory carbon reporting regulations in line with the industry standard.

Banks, investors & insurers back recommendations: Forbes note that 'Major banks, insurers and investors feature among more than 100 business leaders’ supporting the recommendations. ... Among the banks are Bank of America, Barclays, HSBC, ING, Australia and New Zealand Banking Group (ANZ) and more, while insurers include Aviva plc and AXA Group.' Both IPE and Responsible Investor ($) highlight support from European institutional investors, with Peter Damgaard Jensen, CEO of Danish pension fund manager PKA and Chair of IIGCC saying "Given their importance at the top of the investment supply chain, large asset owners and asset managers also recognise they have an important role to play in driving the swift and widespread adoption of this framework.'"

More homework for fund managers: Financial News say the TCFD 'has not stinted in laying out the part investors have to play in the low-carbon transition' and has 'given fund managers plenty of food for thought. … The Task Force now wants fund managers to embrace a slew of additional climate-change disclosure requirements of their own. … Its report contains many examples of "supplemental guidance for asset managers'. These advise professional investors to do things like "describe how each product or investment strategy might be affected by the transition to a low-carbon economy"; "describe their metrics used to assess climate-related risks and opportunities"; and "engagement activity with investee companies to encourage better disclosure".' In an analysis of the report on RI, Daniel Brookesbanksays the TCFD report "could be deemed a success if it helps to focus people’s minds on the whole concept of materiality" (Responsible Investor, free access). Pensions & Investment, Footprintnews, and Ship & Bunker also cover story.

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