Progress on decarbonisation, but much more to do

Friday 11 November 2022

A report by EY has found businesses have started to "up their game on climate disclosure" but the researchers warn many "are still slow to act on decarbonisation".

The authors of the latest EY Global Climate Risk Barometer say there has been a steep increase in the number of companies providing disclosure on climate impacts but quality of reporting is not improving.

They've also said that just one-third of organisations mention the impact of climate change on their business in financial statements.

The report, now in its fourth year, looks at the extent to which organisations across the globe are reporting on, and taking action to mitigate their climate risks and opportunities.

It examines the efforts of more than 1,500 businesses in 47 countries to publish information, based on the 11 recommendations set by the Task Force on Climate-related Financial Disclosures (TCFD), which was established to improve and increase reporting of climate-related financial data.

The Barometer scores companies on the number of recommended disclosures that they make (coverage) and the extent or detail of each disclosure (quality).

Pictured: More businesses are trying to decarbonise according to an EY report.

According to the Barometer, more organisations are now providing some level of information (better coverage) on each of the recommendations than in previous years. Where a score of 100% would show information being disclosed on all recommendations, this year’s average score is 84% – a steep rise from 70% in 2021.

However, companies are still struggling to improve the quality of their disclosures. The average quality score sits at 44% – just slightly above the score of 42% in last year’s survey. A score of 100% would demonstrate that a company is disclosing all of the details needed.

Peter Miller, an Assurance Partner at EY in Guernsey, said this information shows progress is being made, but more still needs to be done.

“This survey suggests that there are signs of progress, not least in businesses’ efforts to build climate impacts into strategies, put in place risk planning, and publish decarbonisation strategies. In Guernsey, Boards are required to consider the impact of climate change on their business strategy and risk profile and, where appropriate, make ‘timely climate change-related disclosures’ as detailed in the GFSC’s Guernsey's Finance Sector Code of Corporate Governance. More recently the Guernsey Financial Services Commission looked at safeguarding measures for investors against the potential risk of false or misleading sustainability claims and published its Guidance for Collective Investment Schemes on measures to counter the risk of greenwashing.

“The increasing demand for financial products that support lower carbon economies is in part evidenced by The International Stock Exchange (TISE) now catering for transition bonds and transition issuers with the launch of a new transition offering within its sustainable finance segment. Guernsey continues to be agile with its innovation in this space, which positions it well to be considered as a jurisdiction of choice for sustainable finance investments.”