TCFD Research
This research is part of our Horizon series and is the third year we have been analysing TCFD reporting using data collected from Black Sun’s ‘Rewiring the Ecosystem for Resilience’ reports. The research focuses on tracking the trends of how FTSE 100 companies are responding to climate issues in advance of potential mandatory reporting requirements, with the purpose of urging companies to take accelerated action on climate issues and to consider their resilience, both in their business and through their communications.
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Why is it an important topic for businesses?
Despite the COVID-19 pandemic, climate change remains a top priority for stakeholders;
- Governments are incorporating climate objectives in fiscal stimulus packages;
- Regulators are requiring companies to disclose on climate issues and for investors to systematically integrate material climate issues to fulfil their stewardship responsibilities;
- Employees want to work for responsible businesses;
- Consumers are shifting to greener living and
- Investors are pressuring companies to take action through engagement, voting and investor initiatives
To address growing stakeholder expectations, and support the flows of capital towards a low carbon economy, the Task Force on Climate-related Financial Disclosures (TCFD) provides a framework for organisations to drive more consistent and effective disclosures on climate risks and opportunities, alongside companies’ mainstream financial filings.
We see the current focus on TCFD as an opportunity to stimulate a debate about some of the issues impacting the long-term sustainability of business today, and that approaching disclosure in line with TCFD recommendations could be applied across other sustainability and ESG issues, such as natural capital, supply chains, employee well-being, diversity and inclusion.
Key takeaways
In our second year of tracking the progress of TCFD reporting, we’ve found the FTSE 100 move to a scenario where the majority reference TCFD, from a majority that didn’t. Although, overall disclosures still show gaps remain between commitments and relevant and meaningful disclosures. In fact, we found that although 67 companies referenced the TCFD in their reporting (up from 39% last year), only three companies disclosed information on all 11 TCFD recommendations in their reports.
Other findings from the report include:
- Financial companies continue to take the lead – 96% are reporting on the TCFD recommendations compared to two third of non-financial services companies.
- Challenges remain in embedding into strategy – 46% (from 32%) of FTSE 100 companies disclose climate issues among principal risks, but only 7% discuss the resilience of their strategy.
- Greater integration into risk required - 48% (from 26%) disclose board oversight of climate-related risks and opportunities, but only 24% (from 16%) describe how risk management processes for climate-related risks are being integrated into the organisation’s overall risk management
- Significant increase in companies setting ambitious targets to reduce emissions, with 46% of companies setting net zero or science based targets (from 25%).
- Leadership a key driver to TCFD disclosures, with companies that describe leaderships approach to climate issues generally disclosing more information under the TCFD compared to companies that don't.
What do we know about reporting?
Like any reporting process, rigorous disclosures aren’t achieved overnight. Each company is at a different stage of the journey with its own path and its own needs. Progress in disclosure requires the experience and collaboration of many different corporate functions to achieve a company’s ultimate reporting objectives. What is the same is that investors and the broader financial system are seeking better information to make more informed decisions about capital allocation and to price risk. Every company will be affected by climate change in a different way, with many needing to address material issues disrupting their business models now, and others needing to address longer-term strategic planning issues.
All of them, however, will have to respond to calls for better disclosure and reporting on challenges, targets and activities regarding climate change.
The time for action is now.
Webinar: On 13 August, Black Sun welcomed two special guests on a panel discussion around the Task Force on Climate-related Financial Disclosures (TCFD) framework: Special Advisor at the Singapore Exchange and Vice-Chair of the TCFD, Lian Sim Yeo, as well as our very own Chief Insight Officer, Sallie Pilot. In the webinar, we also presented the overall findings of our analysis of TCFD Reporting among the FTSE 100 companies. An event summary can be found here.
How Black Sun can help?
Want some insights into how your business can develop to align with the challenges of a new economy? We can provide a benchmark assessment to evaluate how your sustainability reporting stacks up.
To request a personalised assessment, please get in touch with Naomi Hawkins.
Black Sun has extensive digital experience working on a range of projects, including B2B and B2C websites, online annual reports, global intranets and global product sites. We also offer bespoke solutions, such as employee apps, social media and film. We can transform how people experience your corporate story, and help bring your content to life through powerful imagery, compelling messages and engaging content.
