The majority of FTSE 100 and the largest 150 firms on the FTSE 250 are not disclosing adequate climate-related data in their annual reports, a study by environmental law firm, ClientEarth, concludes. The study looks at 2019-20 financial and audit reports and shows that, while 95% of companies are disclosing Scope 1 and 2 emissions, over 90% make no reference to climate change factors, and fewer than 25% allude to the impact of the climate crisis on their business models. The companies analysed from the FTSE 250 perform significantly worse than those in the FTSE 100. A special mention is made of the TCFD. It is the baseline industry standard for making climate change-related disclosures in financial reporting; however, only 48% of analysed companies mention using the TCFD’s guidelines for their reports, of which only 29% are from the FTSE 250.
The slew of businesses promising to take action on climate change might make us hopeful that positive change is on its way, but to what extent will the private sector publicly disclose their contribution to the crisis and how they intend to adapt? Admittedly, ClientEarth does not consider whether any of the assessed companies produces a separate sustainability report, where they might display some relevant climate-related information; however, its findings from the two annual reports seem to suggest that pressure from investors, governments and regulatory agencies will be not just beneficial, but essential, to ensure companies disclose all the necessary climate data and make sustainable investment decisions. Steps are being taken in this direction, too. More recently, the UK Government announced that it will start making big companies and pension funds come clean on climate risks, by producing TCFD-aligned disclosures in the coming years, with the expectation that rules will soon be tightened and extended to a growing number of companies. FTSE companies have come a long way over the past few years, but they are still a far cry from closing the accountability gap. As the study contends, it might be high time that regulatory bodies start demanding granular disclosures of climate risk and net-zero plans, and take stern action against companies that keep omitting information.
Author: Irene Gracia