EY’s sustainability team just released a new survey of 1500 companies in 47 countries.
A short table succinctly summarizes the results:
The Disconnect between Climate Disclosure Reporting and Credible Reduction Plans
Summary of EY’s survey of 1500 companies, October 2022
Climate Disclosures that Include Risk Exposure
Compliance with TCFD Disclosure Requirements
Quantitative Financial Impact Disclosed*
|Financial Asset Owners & Managers||72%||35%||15%|
Source: EY, Global Climate Risk Barometer, 2022
* GLYNT Estimate from the survey data
As the table shows, for the industries investors will be most impacted by climate change – the industries with the highest value at risk – the rate of reporting on climate disclosures is high, but the quality of the analysis is low. There is a large disconnect between reporting and the quantitative disclosures that drive credibility.
But, providing credible carbon reduction plans is key to standing out from peers and maintaining valuations as we head into our climate-challenged future. Closing the disconnect from reporting to action is imperative, for both the planet and long-term enterprise value.
The good news is that the disclosure disconnect can be closed with two straightforward steps:
1. Accurate, Actual Data
Climate risk hits physical locations and business models. For example, suppose models show that a 1-in-a-100 year flood will miss your distribution center, but hit the local sewage treatment plant. Your facility is shut down until the plant is repaired. Fine-grained data by location and over long risk cycles is needed.
Or suppose that the top team wants to reduce carbon emissions by 30% to comply with vendor mandates set by key customers. This requires accurate actual data on current emissions, nature of the projects that will reduce emissions, and the projected emissions outcome. Many companies still use estimated emissions in climate disclosures, and shifting to actual data will give the reduction plans the credibility investors require.