While policymakers are pushing for the adoption of climate-related financial reporting standards, few companies are adequately disclosing climate risk information, a report from the International Financial Reporting Standards (IFRS) Foundation has found. In addition, few jurisdictions have implemented mandatory or even voluntary reporting.
“Further action is needed to address the fact investors are still not receiving the information they need to assess and price appropriately climate and other sustainability-related risks and opportunities,” said Emmanuel Faber, chair of the International Sustainability Standards Board (ISSB), one of the two standard setting boards established by the IFRS.
An AI analysis by the foundation found that while the number of companies disclosing information rose from 2022 to 2023, only 2-3% of global public companies report information in line with all of the disclosures recommended by the Task Force on Climate-related Financial Disclosures (TCFD).
As a result, few companies disclose information about their governance, strategy, risk management, and metrics and targets related to climate change risk.
“This lack of information could hinder investors’, lenders’ and other creditors’ ability to assess and price climate-related risks and opportunities,” the report states.
The analysis found that 82% of companies disclosed information in line with at least one of the TCFD recommendations but that more progress was needed. Meanwhile, 1,000 companies have referenced ISSB standards in their disclosure reports, while 30 jurisdictions are working on introducing them into their legal or regulatory framework. That represents about 57% of global GDP and more than half of greenhouse gas emissions.
Of these jurisdictions, 14 have issued or proposed disclosure requirements that are aligned with the TCFD, while 16 jurisdictions, mostly in emerging markets like Africa, Latin America and Asia-Oceania, have introduced disclosure requirements for the first time.
The report also noted that fragmentation in regulatory requirements, especially when ISSB standards are removed or modified, “could conflict with the objective of delivering timely and comparable sustainability-related financial information to capital markets”, adding cost and complexity to firms.
Meanwhile, a separate progress report from the Financial Stability Board (FSB) found that of the 24 member jurisdictions, 19 have enacted regulations, issued guidelines or developed roadmaps for climate disclosures. Only 17 have set or proposed voluntary or mandatory disclosure requirements based on ISSB and TCFD recommendations.
However, only the EU and Turkey have mandatory reporting for the 2024 fiscal year. Other jurisdictions have also made reporting mandatory in the future, including Australia and Singapore in 2025, Brazil in 2026, and China in 2027. Canada has made progress but its reporting disclosures remain voluntary, while other jurisdictions are still working out the details of their regulations.
This page was last updated November 28, 2024
Written by
Moriah Costa is the Editor-in-Chief of Green Central Banking and has over a decade of experience writing about banking and finance. She is an award-winning American journalist based in Paris and has written for major international publications, including Reuters, The Guardian, and S&P Global. Having grown up in water-stressed Arizona, she has always had a strong interest in bringing awareness to climate and environmental issues.
