When will climate disclosures start to impact decarbonization?

Although more companies are reporting on climate risk, their disclosures are still not translating into practical strategies to accelerate decarbonization. This issue is explored by the fourth EY Global Climate Risk Barometer, a comprehensive analysis of disclosures made by more than 1,500 companies across 47 countries.

The research found that while TCFD recommendations coverage scored highly in corporate reports, the low average score for quality shows a wide gap between coverage and quality, suggesting that some companies are not providing meaningful disclosures regarding their challenges. In addition, leaders and laggard vary widely among sectors and regions. From a market perspective, the UK tops the list in terms of both coverage and quality and followed closely by Japan.

Reporting is an important aid to the decarbonization process by holding companies to be accountable. Since investors are effectively pushing the companies they invest in to produce more comprehensive reporting on climate risk, boards and senior management teams should use their disclosures to inform their stakeholders about how they comprehend and manage their risks in practice. However, financial impact of disclosures is still in its infancy. The key finding of the Barometer states that fewer than 30% of companies surveyed referenced climate-related matters in their financial statements as both qualitative and quantitative aspects.

Therefore, Companies must bridge the gap between their TCFD disclosures and their transformation journeys to meet their net-zero goals. To enhance corporate reporting and accounting, the EY climate change and sustainability services help businesses respond to climate risks, as well as advise on how to meet rapidly evolving regulatory demands.

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