Insights into investor expectations of climate risk disclosure

Report from IGCC and Energetics

Author Olivia Kember, Dr Peter Holt

Date August 2020

More and more companies are reporting their climate-related financial risks using the guidance developed by the Financial Stability Board’s Taskforce for Climate-related Financial Disclosures (TCFD).

However, while adoption of the TCFD framework is growing, are investors getting the insights they need to inform their investment decisions?

To understand the value to investors, the Investor Group on Climate Change (IGCC) which represents institutional investors from across Australia and New Zealand, has released the findings of a survey conducted with over 50 investors from 22 organisations with more than $1.1 trillion in collective funds under management. Titled, Full Disclosure: Improving Corporate Reporting on Climate Risk, the report found that significant improvements are needed to make climate disclosures more useful for decision-making, risk assessment, portfolio management and company engagement.

Specifically, investors are seeking disclosures that do the following.

  • Demonstrate board, director and executive level skills and expertise in climate change
  • Report links between climate-related performance and executive remuneration
  • Demonstrate links between risks and opportunities identified and the company’s strategic and organisational response
  • Extend reporting of emissions metrics and targets to scope 3 emissions, where material
  • Report on both transition and physical risks, costs and implications
  • Provide auditing and assurance of results as it becomes more important

Energetics was engaged by the IGCC to develop the survey, assess the findings and extrapolate the insights and recommendations. 

You can access the IGCC media release here.

You can access the full report Full Disclosure: Improving Corporate Reporting on Climate Risk here.