Mandatory TCFD reporting needed for net zero emissions – Aldersgate Group
The UK must force businesses and investors to report their exposure to climate change in line with the Taskforce on Climate-related Financial Disclosures (TCFD) if the country is to achieve net zero emissions.
That is according to a new policy briefing from the Aldersgate Group, which urges the UK government to introduce mandatory TCFD disclosures in the early 2020s and force businesses to explain how they manage climate risks.
The NGO said this would be key to providing meaningful and comparable information to investors, and to ensure that business and investment strategies are aligned with the UK’s net zero 2050 target.
“Mandatory disclosure of climate risks is essential to drive economy-wide action to cut emissions in line with the UK net zero target and improve the economy’s resilience to the physical impacts of climate change and risks associated with a disorderly transition to a net zero economy," Aldersgate Group executive director, Nick Molho, said.
The policy briefing recommends that all large companies currently reporting under the Streamlined Energy and Carbon Reporting regime be subject to mandatory disclosures in the next few years.
This would be done on a ‘comply or explain’ basis, and once best practice and meaningful reference scenarios have been developed, be broadened to a wider range of businesses so that supply chains are comprehensively covered.
And reporting should be focused on decision-useful information so that disclosure actually leads to a meaningful change in the way businesses and investors reduce their exposure to the physical and regulatory risks, according to the briefing.
It also suggests that the government provide guidance for businesses to develop the meaningful long-term scenarios required by the TCFDs, and set up a 'Corporate Reporting Lab' forum for stakeholders to share information.
Ministers are also urged to continue to work closely with international partners to ensure as much consistency as possible, while investors are told to play a more proactive role by holding the companies they invest in to account.
The briefing was published just one day after the governor of the Bank of England, Mark Carney, said that corporations should agree climate reporting rules before mandatory regulations are forced on them.
“The UK is in a leadership position when it comes to green finance and climate action,” Molho continued.
“The government can extend this leadership by announcing the introduction of mandatory TCFD-aligned reporting as part of the interim review of the Green Finance Strategy in 2020, and by using its influential position as host of the COP26 climate summit to encourage its key international partners to follow suit.”
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Chris Seekings is a reporter for TRANSFORM