Climate-change disclosures leave much to be desired, says GSIA

Newly released poll shows vast majority of investment professionals see shortfall in pricing of climate-change risks

Climate-change disclosures leave much to be desired, says GSIA

Most investment professionals believe more should be done in terms of disclosing and pricing climate-change risks, according to the Global Sustainable Investing Alliance (GSIA), a global collaboration of membership-based sustainable investment organizations.

Those were the key findings of its recent Sustainable Investor Poll on TCFD Implementation, a survey that asked more than 270 investment professionals around the world. Respondents were asked specific questions about how well they thought companies were following recommendations issued by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) in 2017.

“The TCFD recommendations are intended to help companies identify and disclose decision-useful information about material climate-related financial risks and opportunities for their businesses,” the report said. “The goal of this disclosure is to enable financial markets to better understand and price those risks and opportunities, and ultimately, to help drive the efficient allocation of capital in the transition to a low-carbon economy.”

According to the GSIA, 898 organizations around the world had declared their support for the TCFD as of September 2019. But none of the investment professionals responding to its survey said they were “very satisfied” with publicly traded companies’ climate-related disclosures; just 16% were “somewhat satisfied,” and 59% were “very” or “somewhat dissatisfied.”

Among US respondents, 77% were “very” or “somewhat dissatisfied,” making it the geography most likely to feel that disclosures are falling short. Meanwhile, Canadian and European respondents were tied for the distinction of most likely to be “somewhat” satisfied with 25% each.

Another question asked respondents if they believed markets are consistently and correctly pricing climate risks into company and sector valuations. The agreement on that was more overwhelming, as 87% of all respondents said they do not believe that is happening. Skepticism was most pronounced among professionals in the US and the UK, where 97% and 95% of respondents, respectively, shared that view.

“Only Canadians and Europeans expressed any belief at all, at 6% and 4%, respectively,” the report noted.

It also found a gap between adoption of the TFCD recommendations and investment professionals’ incorporation of TFCD disclosures in their analyses. Around a third (34%) of respondents said they were already incorporating the disclosures; just about a quarter (26%) said they plan to do so by the end of 2020, and another 9% said they plan to complete their implementation at some point after 2020.

However, “[o]nly 16% of total respondents are already reporting in line with the TCFD recommendations, and a further 19% intend to do so in 2020,” the report said. “An additional 28% of respondents are exploring the possibility.”


Follow WP on Facebook, LinkedIn and Twitter