Companies with little to report embracing TCFD rules the most

Banks don’t directly belch out much carbon, yet they are most likely to have signed on to report their emissions under the Task Force for Climate-Related Financial Disclosures (TCFD) requirements, according to a report from Moody’s ESG Solutions.

The firm analyzed almost 5,000 companies globally, saying it found little correlation between a sector’s average carbon footprint and the proportion of companies within the sector that have pledged to adhere to the TCFD recommendations.

The banking sector had the highest adoption rate of TCFD recommendations, whereas heavy polluting sectors such as energy had low rates of TCFD adoption.

Moody’s ESG Solutions expects this to change as investors and regulators demand more climate-related disclosure, which should prompt an increasing number of companies in carbon-heavy sectors to adopt the TCFD disclosures.

“As net zero commitments increase, so do the calls for transparency around companies’ climate risks and transition plans,” Moody’s said.

To that end, the TCFD recommendations have emerged as the front runner to become the global standard, and regulators in certain jurisdictions (including Canada) are proposing to mandate TCFD-aligned disclosure.

While banks have been relatively quick to adopt these requirements due to demand for disclosure of “financed emissions,” the report said, “For banks to better understand and disclose their climate risks, there is a need for enhanced corporate climate disclosure across the board.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.