Some businesses still don’t project the impact climate change can have to the organisations in their financial reports.
That’s according to the Task Force on Climate-related Financial Disclosures, which believe climate-related financial disclosures remain “fragmented and incomplete”.
Established by the Financial Stability Board (FSB) in December last year, it aims to promote more effective climate-related financial disclosures that will support informed investment, credit and insurance-underwriting decisions about reporting companies.
It will also enable a variety of financial market participants to better understand the concentrations of carbon-related assets in the financial sector and the system’s exposures to climate-related risks.
In its first report the task force stated there has been progress from governments, businesses and NGOs in climate-related disclosure but more needs to be done.
It found few businesses engage in research to project how vulnerable their business is to the financial risks posed by climate change-related impacts and some of them are inconsistent that the information they provide is of little use to investors.
The report identifies seven principles for effective climate-related financial disclosure which include presenting relevant information, being specific, complete, clear, balanced and understandable.
Michael Bloomberg, Mayor of New York and Head of the task force said: “The absence of a standardised framework for disclosing climate-related risks makes it difficult for preparers to determine what information should be included in their financial filings and how it should be presented.
“The resulting fragmentation in their reporting practices has prevented investors, creditors and underwriters from accessing information that can inform their decisions. In addition the same problem also can hinder regulators in their efforts to determine potential system-wide vulnerabilities.”