Full disclosure: improving corporate disclosure on climate risk

Climate risk Corporate environmental reporting Long-term investing Climate change Investments

For the first time, the views of multiple major Australian and New Zealand investors have been brought together to define investor priorities for climate-related reporting. By giving reporting companies a better sense of what investors believe constitutes “decision-useful” or “investable” information, this report aims to improve the quality of corporate disclosures and thereby improve companies’ approaches to managing climate-related risks.

Investors want to understand how climate-related risk information translates into action. A common starting point for companies adopting the Task Force on Climate-related Financial Disclosure (TCFD) recommendations is to establish structures, processes, and analysis. However, these are valuable only when they then inform decision-making. To date evidence that companies are translating reporting into action is often absent in corporate climate disclosures.

For investors, the following features are critical:

  • Discussion of how climate risk informs strategy and planning
  • Evidence that the board understands climate-related risks
  • Assessment of the impact (qualitative and quantitative) of actions taken to manage risks and capture opportunities, and evidence that actions are sufficiently well-defined, proportionate and strategic for the scale of the issues being addressed
  • Evidence of performance within each of the above areas.
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