Fewer than 50 UK public companies are comprehensively reporting on climate risks and setting targets in line with the Task Force on Climate-related Financial Disclosures (TCFD), despite investor pressure and government plans to make the global framework mandatory.
About 154 companies last year referenced the TCFD, the framework spearheaded by former Bank of England governor Mark Carney, according to a report from the corporate governance team at FTI Consulting, which advises businesses on environmental, social and governance issues, and Sentieo, a financial and corporate research company.
However, the report also found that despite an almost quadrupling in companies referencing the TCFD since 2017, few were doing an adequate job reporting under the framework, with many just making glancing references and failing to set targets or monitor their efforts in either their annual reports or financial results.
About 68 FTSE 100 businesses made at least a reference to the TCFD, but mid-cap and smaller companies were far less likely to mention the framework.
The lack of reporting from UK plc comes despite the government’s plans for the country to become the first in the world to require climate risk disclosures across the economy. Under the plans, all premium-listed companies have to report under the TCFD on a comply or explain basis from the start of this year.
Big asset managers, including BlackRock and Aviva Investors, have also demanded companies disclose their climate risks based on the framework.
Peter Reilly, senior director in FTI’s corporate governance team, said the data suggested there was “a distance to travel for UK companies to not just meet their impending regulatory obligations but also the demands of investors and wider stakeholders”.
“The TCFD has become the de facto regulatory guidance in this space and as increasing numbers of companies report against its framework, those companies failing to detail its integration throughout its business may become increasingly exposed to investor push back and climate-related risks,” he warned.
According to the research, financial businesses were most likely to reference the TCFD, followed by industrials. There were fewer mentions among telecoms, technology and healthcare companies.
Reilly argued that while big emitters had traditionally been the target of investor pressure over global warming, “expectations of climate reporting and associated regulatory changes are now sector agnostic”.
Big investors have become increasingly outspoken about the financial risks of climate change, arguing they need companies to report under frameworks such as the TCFD in order to understand how exposed and prepared businesses are for the transition to a lower carbon economy.
In February, the Investment Association, the UK’s trade body for asset managers with £8.5tn under management, said it would flag when companies in high-risk sectors failed to report under the TCFD, in a move that could lead to shareholders voting against either directors or the accounts over the coming months.
Sarah Woodfield, stewardship manager at the IA, said: “If the UK is to meet its net zero target by 2050, it is vital companies start providing clear and consistent data on the climate-related risks they are facing.”