Are companies implementing the EU Non-Financial Reporting Directive?

Jay Owen Reforming Global Finance, Beyond GDP, Transforming Finance

Following the first year of reporting under the EU Non-Financial Information Directive (2014/95/EU), CDSB and CDP conducted a review of corporate disclosure of climate change and environmental information across Europe.

This research provides evidence of reporting practices of 80 companies, indicates what information companies are currently disclosing and whether companies are implementing the recommendations of the G20 Task Force on Climate-related Financial Disclosures (TCFD).

The research found that:

·         83% of companies disclose their business model in some shape or form;

·         76% disclose the role of environmental or climate change matters in their financing and investments; and

·         79% identify at least one climate or environmental risk.

However, there is room for improvement. The evidence shows that:

·         Less than half (48%) of the sample describe their due diligence processes for climate and environmental risks;

·         Only 13% identifies the time horizon associated with an identified climate or environmental risk; and

·         39% of all companies disclose scope 1, 2 and 3 emissions and only 41% disclose GHG emissions targets.

This evidence demonstrates that there is more that needs to be done in order to provide a clear and comprehensive overview of corporate performance and dependence on climate and environmental matters. The report therefore concludes with 7 recommendations.

Read more here

TCFD implementation in Europe

Analysis of 80 publicly-listed companies’ annual reports from across Europe (mainly UK, France and Germany) revealed that 62% of companies do not refer to the TCFD in their management report.

Notwithstanding, there is a growing body of evidence of initial disclosures of climate-related financial information emerging. We found 30 of the top 80 European companies by market capitalisation have made statements in support of the TCFD and/or provide some specific TCFD-aligned disclosures in their management reports. This supplementary note to the First Steps report offers a qualitative snapshot of the nature of these disclosures through a TCFD lens.

These management reports provide an overview of the approaches to, and nature of the corporate disclosures on climate-related risks and opportunities in line with the TCFD recommendations. There is great diversity in the approach taken, level of disclosures in this area, and where each company is in their TCFD reporting journey. While this makes comparisons across companies and sectors challenging, some flexibility must be allowed for companies at different stages of the TCFD adoption curve. As the body of reporting practice continues to grow and disclosures evolve, further opportunities for harmonisation should emerge. However, before processes become too embedded, now is the opportune time to ensure greater alignment between disclosures related to environmental and climate matters under the NFRD and those of the TCFD.

Read more here