Moody's review of the climate-related disclosures of 28 European and US companies (60%/40%, respectively) in some of the most environmentally sensitive industries (building materials, oil & gas, and utilities - see Appendix) revealed a laudable level of board and management focus on the importance and strategic impacts of climate change, and use of established disclosure frameworks.
Specifically, disclosures revealed:
- Climate change impacting strategy at 80% of companies
- Board sign-off on disclosures for 75% of companies
- Use of either the TCFD recommendations or GRI standards by all companies
- Use of environmental metrics in executive incentive pay for 40% of companies
- Reporting on GHG Scope 1 emissions by all companies, and reporting on at least one emission reduction target by 90% of companies
The report notes, however, a lack of consistency in the quality and depth of disclosure across companies, and the dearth of disclosures that quantify the potential financial impacts of climate change. Moody's comments: "The adoption of standardised frameworks will likely take several years as companies try to quantify financial impacts, set metrics and targets, and demonstrate their ability to withstand different climate scenarios."
This post first appeared in the weekly Society Alert!