Insurance and asset management giant Aviva has said in a new report that existing sustainable disclosure frameworks, such as the CDP and the Sustainability Accounting Standards Board (SASB), should work together to create sector-based corporate disclosure benchmarks focused on climate risk, in a move it says will be “concurrent” with recommendations due soon from a high-level panel on climate disclosure.
The proposals from the Financial Stability Board’s Task Force on Climate Related Financial Disclosures (TCFD), a body set up at the initiative of Bank of England Governor Mark Carney and chaired by data mogul Michael Bloomberg, are due next month.
It is being stressed that the Aviva document has “not been written on behalf of either the FSB or the TCFD” and represents the views of its authors. But it does perhaps give a flavour of some of the thinking at the TCFD, given that one of the authors is Steve Waygood, a task force member and Aviva’s Chief Responsible Investment Officer.
He’s written the report Seeing Beyond the Tragedy of Horizons – a nod to Carney’s pivotal speech last year – with his colleague Stephanie Maier. Maier is Head of Strategy and Research at Aviva Investors and Chair of the Corporate Programme at the Institutional Investors Group on Climate Change (IIGCC).
“We believe that concurrent with the conclusions of the TCFD, the Carbon Disclosure Standards Board (CDSB), working closely with CDP, the Global Reporting Initiative, the International Integrated Reporting Council, the Sustainability Accounting Standards Board, and the World Business Council on Sustainable Development (WBCSD) should work together to build a multi-stakeholder initiative to assemble best practice corporate disclosure benchmarks,” Waygood and Maier write.
Michael Zimonyi, Policy and External Affairs Manager at the CDSB, told RI it was an interesting idea that made sense. “Collaboration is key. We all work closely together but more could be done,” he said.
The Aviva authors say the benchmarks will need to be on a sectoral basis, measuring the quality of disclosure on material climate risk disclosures and that a multi-stakeholder approach will ensure the disclosures reflect the upcoming TCFD guidance.They continue: “The annual publication of these sectoral disclosure league tables will help to focus both the minds of the corporate boards as well as asset owner and asset manager attention on lagging companies. This will help to ensure that leading companies will be rewarded for good climate risk governance and good disclosures. Conversely, lagging companies will be much more likely to help to account for the poor quality of their disclosures.”
The report comes just two weeks before the TCFD is due to publish what could prove to be a landmark moment in the development of climate disclosure.
The Aviva paper welcomes the TCFD initiative, saying it’s vital in helping investors approach climate risk. But it also expects the take-up of the task force’s recommendations to be impeded by a lack of expert internal staff and external consultants. It predicts by the 2019 reporting season there will be a considerable deepening of disclosure practices.
On asset owner actions to tackle climate risk, Aviva says they should demand information on how their asset managers integrate climate risk into their investment processes and seek credible data on their engagement with portfolio companies exposed to climate risk.
Looking wider, Aviva says building on the upcoming TCFD report, the International Accounting Standards Board should enhanced the accounting disclosure framework for extractive sector, particularly oil, gas and coal. It also says the International Organisation for Security Commissions (IOSCO) should work with the Sustainable Stock Exchange Initiative to help coordinate more consistent international listing rules on the disclosures of emissions by energy intensive companies.
The paper also recommends that the G20-OECD High-level Principles of Long-term investment Financing by Institutional Investors establish a convention defining a common interpretation of fiduciary duty focused on the long-term, and that explicitly includes climate risk. The OECD is currently undertaking an ongoing review into the area of investor governance.