Lawmakers worldwide back TCFD and urge stock exchanges to commit to climate disclosure

Mark Carney-convened climate disclosure task force gets political backing

Lawmakers in 34 countries have thrown their weight behind the work of the high-level panel convened by the Financial Stability Board, the Task Force on Climate-Related Financial Disclosure (TCFD), calling on stock exchanges and financial regulators to commit to enhanced disclosure and transparency.

After the release yesterday in London of the TCFD’s long-awaited draft recommendations (subject to consultation until February 12 2017), 140 MPs from 34 countries have signed an open letter “to the Chief Executives of all Stock Exchanges around the world”.

The group of international MPs explicitly acknowledged the financial risk that stranded assets pose after the Paris Agreement, at a time when economies need to transition to a low carbon economy in order to meet COP21 emissions targets.

The parliamentarians also underscored how investors require the disclosure of such risks to allocate assets in a sustainable fashion.

Thus the MPs warned that investors need “consistent, comparable and reliable measurement and assessment”, being the TCFD’s recommendations a crucial tool.

The promoter of the initiative is Barry Gardiner, the UK Shadow Secretary for International Trade and Shadow Minister for International Climate Change, who said:

“The world’s financial systems are only just beginning to focus on the threat to pension funds and other investors from stranded assets and supply chain risks.

“Financial institutions must respond responsibly to the work of the FSB Task Force on Climate-Related Financial Disclosures.”

The initiative started at fringe meetings and informal gatherings at different international fora, such as the European Business Summits or the Global Legislators Organisation (GLOBE International) convening international parliamentarians.

Asked by RI about the letter, Nandini Sukumar, CEO of the World Federation of Exchanges, said: “A number of WFE members have already put out disclosure statements.

“We look forward to seeing the results of the task force and engaging further with it on ensuring investor-relevant disclosure. As an industry we support transparency and accountability, and support measures aimed at sustaining the long-term health of markets.’’A spokesperson for the Federation of European Securities Exchanges (FESE) told RI that it is aware of the work of the TCFD and closely monitors other initiatives in this field promoted by the European Commission.

However, as a trade body, the spokesperson said it wouldn’t be possible to immediately comment on behalf of its members without forming a common position on the issues raised by the letter.

Similarly, a spokesperson for the London Stock Exchange acknowledged closely monitoring the work of the TCFD and said the LSE planned to release a project involving voluntary guidelines related to the matter.

However, as it coincided with the publication of the TCFD recommendations this week, the exchange has postponed the publication of such guidelines until February 2017.

The International Organization of Securities Commissions (IOSCO) was not immediately available for comment.

The majority of the parliamentarians are from the UK (40), followed by Japan (22) and Italy (16); whereas three signatories are from the US and Germany.

The full list of countries represented is as follows: Benin, Brazil, Bangladesh, Cameroon, Chile, Costa Rica, Ecuador, Ethiopia, Finland, France, Germany, Ghana, Greece, Hungary, Italy, Japan, Jordan, Kenya, Lebanon, Liberia, Mexico, Morocco, Netherlands, Nigeria, Norway, Peru, Senegal, Spain, Sri Lanka, Tanzania, The Gambia, Uganda, United Kingdom and the United States.

Action points in the parliamentarians’ letter:
1. Promote the adoption of climate-related reporting guidance and disclosure for all listed companies
2. Commit to implement best international practice in reporting requirements for sustainability and climate-related risks.
3. Ensure that progress in reporting by companies is transparently monitored and easily accessible to all stakeholders.