FTSE Russell: Less than a third of corporates disclose green revenues globally

The EU has introduced taxonomy-aligned disclosure requirements based on green revenues.

FTSE Russell data shared with Responsible Investor shows little variation in levels of corporate disclosure of green revenues across regions, despite differing regulatory contexts.

According to the provider, Asia Pacific topped global disclosure rates by around two percentage points at 31 percent, followed by Europe at 29 percent and America at 28. Middle East and Africa trailed other regions with 27 percent of disclosures. The global rate is around 30 percent.

Green revenues are a key investment metric to assess a firm’s environmental performance and its exposure to climate-related risks. The low levels of disclosure – and corresponding reliance on estimates – will impact the usability of green taxonomies for the financial markets, which rely on revenue splits to determent the degree of corporate alignment.

In Europe, asset managers are already required to disclose the proportion of their investments that are broadly eligible under the bloc’s green taxonomy from this year, starting with the 2021 reporting period.

But the EU has itself noted the lack of reliable taxonomy data and has asked financial sector participants to report zero alignment to the taxonomy should they fail to collect the requisite information.

Lily Dai, a senior research lead at FTSE Russell, said: “Disclosure levels do not differ drastically across regions. In general, corporate disclosure on green activities is quite limited, leading to a significant reliance on estimates.

“In APAC, the focus so far is more on debt financing, which encourages disclosure on specific green projects financed by green bonds, for example, but not necessarily the breakdown of green and non-green activities of a company.”

Dai noted that the scope of company businesses could influence disclosure levels. “A pure play green economy company with a single business line is likely to disclose granular information at the product or service level, whereas a conglomerate may not provide such granularity due to complicated business lines,” she said.

However, Dai noted that EU companies have started to provide information on taxonomy-aligned green revenues, which could result in “more quality and standardised data and disclosure in [the] near future”.

FTSE’s data is based on 3,000 companies with green revenues drawn from the constituents of the FTSE Global Equity Index Series and Russell 3000 Index. The figures are from March 2022.