ATP, Aviva and BP among scenario analysis leaders named in EU-backed review

30 companies, insurers and investors have been praised for their climate reporting and scenario analysis in new guidance from The European Corporate Reporting Lab – a group of market experts convened by the European Financial Reporting Advisory Group as part of the EU's Action Plan on Sustainable Finance. 

The Lab, which includes representatives from reporting and accounting bodies, corporates, banks, universities, stock exchanges and trade groups, has published three documents assessing the current state of play on climate reporting, with a particular focus on TCFD-aligned scenario analysis. 

'The development of sectoral guidance could be helpful' – suggestions from the How to Improve Climate-related Reporting study 

“The report intends to provide a useful toolkit for preparers, users and other stakeholders interested in climate-related information,” said Head of Group Investment Office for reinsurer SCOR, Michele Lacroix, who Chairs the taskforce that conducted the research. 

150 companies were assessed for the study, which is the first major piece of work to come out of the European Corporate Reporting Lab. 58 examples of good reporting were identified from 30 companies. 

As well as well-known climate leaders such as Aviva, Axa and Danish pension fund ATP, there were some less likely companies highlighted. Among those identified as leaders on scenario analysis were Oil Search – the oil & gas exploration company that operates all of Papua New Guinea’s oilfields – and fellow oil heavyweights Eni, BP and Equinor. Mining companies Rio Tinto and South32 also received praise.

 

The taskforce concluded that there was “room for improvement, even among more mature reporting companies,” and that some firms still consider TCFD disclosure as “a pure compliance exercise” instead of an opportunity to provide investors with robust analysis on risk and strategy. “[Some] companies only use climate-related reporting for communication purposes without a connection to their business strategy.”

Not enough companies reference national and international climate commitments like the Nationally Determined Contributions, it adds, and disclosure around physical climate risks are scant. 

“There are only a few examples of companies that describe the board’s role in the oversight of climate-related risks and opportunities. Many companies claim to have integrated sustainability or climate risks into their overall risk management system without providing information on the process for doing so,” it continues. 

It recommends that companies disclose how climate-related performance metrics are incorporated into pay policies and report on the roles and methodologies involved in climate risk management.

The taskforce says it observed scenario analysis to be the most challenging area of climate reporting for companies, pointing out that some companies only use one scenario, which “misses the point of the exercise”. “Patchy” information, uncertainty around policymaking, and challenges around embedding climate models such as the IPCC and IEA  findings make scenario analysis especially difficult, the study claims, suggesting that “the development of sectoral guidance could be helpful”. This would also help investors to compare peers, it added. 

The Lab has invited feedback on its report.