“Carbon Tracker lauds the FSB Task Force’s efforts to harmonize disclosure of the material risks of climate change in order to provide decision-useful information to the users of corporate reports. Addressing current disclosure gaps will allow users of financial disclosures to better assess how companies consider and manage climate-related risks,” said Mark Campanale, founder of the Carbon Tracker Initiative.
Carbon Tracker has focused on the risks that a low-carbon energy transition pose to the fossil fuel extractives industry, since the two-degree climate target implies a carbon budget that is far exceeded by global reserves and resources. The Task Force notes that, while companies do disclose some information on climate-related risks, under current reporting regimes, the “[r]isks related to the transition to a low-carbon economy are unlikely to be disclosed.”
To remedy this, the Task Force will consider a range of reporting options, including forward-looking, industry-specific disclosures, comparable scenario and sensitivity analyses. “The direction of travel towards a lower-carbon economy is clear; stress-testing extractives companies’ businesses portfolios against the internationally agreed two-degree climate target is essential to quantifying their exposure,” said Rob Schuwerk, Senior Counsel, Carbon Tracker.
Carbon Tracker welcomes the Task Force’s recognition that meaningful investor engagement with boards and management on climate risks requires more informed discussion about how these risks may impact a business. In particular, the report notes that better disclosures “can promote more informed decision-making by the users of disclosures and better risk management by boards and management, which, in turn, will enable a more appropriate pricing of risk, thereby helping promote a more stable financial system.”
Mark Campanale commented “Investors no longer want to see regulatory filings from fossil fuel companies that fail to discuss how the low carbon transition might impact their business models. We welcome the Task Force’s comment that ‘Due to their characteristics, assessing climate-related issues requires forward-looking dynamic disclosures.’ This appears to indicate that companies should explain how lower demand for fossil fuels might impact new capex on large projects or expansion plans, associated with a low demand 2˚C scenario.”
Carbon Tracker looks forward to the TCFD Phase II Report.