A key objective of the Task Force’s work, as outlined by the FSB, is to promote more effective climate- related disclosures that (1) will support informed investment, credit, and insurance underwriting decisions about reporting companies, and (2) will enable a variety of stakeholders to understand the concentrations of carbon-related assets in the financial sector and the financial system’s exposures to climate-related risk.
The Task Force has been asked to deliver two reports:
A first report (to be delivered by March 31, 2016) that will set out the scope and high-level objectives for the proposed work, together with a set of fundamental principles of disclosure, to provide an enduring disclosure framework and guide the Task Force’s Phase II recommendations.
A final report (to be delivered by the end of 2016) that will set out specific recommendations and guidelines for voluntary disclosure by identifying leading practices to improve consistency, accessibility, clarity, and usefulness of climate-related financial reporting.
In keeping with the FSB remit, this Phase I Report discusses four key areas:
First, the Task Force has conducted a high-level review of the existing landscape of climate-related disclosures—including current voluntary and mandatory climate-related disclosure regimes—to identify commonalities, gaps, and areas for improvement. The review highlighted the progress that has been made by governments, stock exchanges, nongovernmental organizations (NGO), and others in the context of disclosure frameworks. At the same time, despite these successes, climate-related disclosure remains fragmented and incomplete, with only a limited number of reporting regimes focusing on the financial risks posed by climate-related impacts. In general, existing laws and regulations already require disclosure of climate-related risk in financial filings if it is deemed material. The Task Force plans to build on existing work to provide a framework that promotes alignment and focuses on financial risks stemming from physical and nonphysical climate-related impacts (including transition and liability risks) to better meet the specific needs of users and preparers. The approach will be market-driven.
2. Objectives and scope
Second, the Phase I Report defines the scope and objectives of our work for Phase II. The Task Force’s recommendations in Phase II will target climate-related financial disclosures pertaining to near-, medium- , and long-term physical and nonphysical impacts faced by both nonfinancial companies and the financial sector, with the goal of furthering market understanding and evaluation of relevant financial risks and opportunities. The Task Force will consider the features and characteristics of information to be disclosed—including quantitative, qualitative, historical, and forward-looking metrics—and how disclosures are used, analyzed, and aggregated. The Task Force will focus primarily on developing recommendations for issuers of public securities, listed companies, and key financial-sector participants. The Task Force will seek to promote and drive voluntary adoption by ensuring that its recommendations reflect a consensus view of leading practices for disclosure; advance principles of good governance, fiduciary duty, and stewardship; and provide a basis for consistent and comparable application by firms in countries throughout the G20.
3. Fundamental principles for effective disclosures
Third, the Task Force has identified seven fundamental principles that are critical for an effective regime for climate-related financial disclosure, summarized as follows:
- Present relevant information
- Be specific and complete
- Be clear, balanced, and understandable
- Be consistent over time
- Be comparable among companies within a sector, industry, or portfolio
- Be reliable, verifiable, and objective
- Be provided on a timely basis
These principles will underpin the Task Force’s Phase II recommendations for enhancing climate-related disclosures and provide an enduring framework for future work on these issues.
4. Stakeholder outreach and engagement
The Task Force is strongly committed to extensive stakeholder engagement and public consultation, soliciting input from nonprofit organizations, industry, the official sector, and academia and ensuring that our work builds on their efforts.