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Summary of reaction to FSB climate disclosure task force’s first report: A ‘seminal day’

*A round-up of the industry’s response to today’s first report from the FSB climate disclosure task force

Today’s ‘Phase 1’ report from the Michael Bloomberg-led Task Force on Climate-related Financial Disclosures could ultimately prove a landmark event in the way both corporates and investors report against the risks of climate change. The report, which runs to 64 pages, will help to frame the debate around climate disclosure in the wake of the COP21 Paris accord. Here we round up some of the key reaction from across the responsible investment space.

Stephanie Pfeifer, CEO of the Institutional Investors Group on Climate Change (IIGCC): “We welcome the work of the TCFD to improve reporting practices and ultimately help improve business resilience to climate change over time horizons relevant to the needs of long term institutional investors.
“We strongly support the focus on more standardised disclosures and forward-looking quantitative and qualitative information. This will help investors better assess and address carbon risk in their portfolios.”
The IIGCC is part of a Global Investor Coalition (GIC) which is engaging with the TCFD. The group wrote to the task force supporting the development of five-part framework and disclosure taxonomy covering quantitative and narrative reporting of climate exposures and risk mitigation strategies.
It added: “Considering the important role of asset owners (pension funds, insurance companies, endowments), which are the end of the investment chain, we recommend that the TCFD appoint additional asset owner members when you expand your membership.”

Mark Campanale, founder of the Carbon Tracker Initiative: “Carbon Tracker lauds the FSB Task Force’s efforts to harmonize disclosure of the material risks of climate change in order to provide decision-useful information to the users of corporate reports. Investors no longer want to see regulatory filings from fossil fuel companies that fail to discuss how the low carbon transition might impact their business models.”

Julian Poulter, Chief Executive Officer, Asset Owners Disclosure Project: “This is one of the seminal days in the battle to minimise climate risk and every bit as important as the Paris Agreement. The FSB has proved it is prepared to show strong leadership in ensuring that all agents in the investment supply chain are considered in the drive to restructure finance to account for systemic climate risk.

“This now sets a course for the whole of finance to be included in this critical initiative without exception, sending a strong signal to the market. The FSB is showing that it is taking the lessons of the financial crisis and applying them to climate change. We urge asset owners to now drive their agents in all asset classes from fund managers to ratings agencies and beyond to re-price climate risk more appropriately and reflect this risk premium in their portfolios as a matter of urgency – it is time to engage heavily with high carbon exposed companies, to divest of the worst fossil fuel companies and to re-invest in clean energy.

“With this report, the FSB has set the stage for the 2016 AODP Climate Indices being launched from May 2. In addition to the regulations being planned by the FSB, we need to know now where the giant funds at the top of the investment chain stand.“Stan Dupré, Director & Founder, 2 Degrees Investing Initiative says the report “reiterates the importance of transparency for the efficient allocation of capital”. He adds: “Moreover, it represents an important step in elevating the role of climate-related disclosure of financial institutions, in particular banks and investors. A dedicated work stream on financial institutions will help to ensure that transparency of financial institutions will be front and center of the debate. This will be an opportunity to build on the mandatory climate-related disclosure introduced for investors in France last year. Ultimately, this will be a key piece of the puzzle on the way to aligning financial markets with the legally binding climate objectives defined in Paris at COP21.”

Steve Waygood, Chief Responsible Investment Officer, Aviva Investors (a member of the TCFD): “The Phase I report represents an extremely important milestone in the work of the Task Force. We have published this report today and would appreciate responses to our consultation questions which are available at https://www.fsb-tcfd.org/survey/. We also encourage stakeholders to submit any written material, including material drafted with the goals of the Task Force in mind or research reports to this address.

Jon Williams, financial services and climate change partner, PwC: “By incorporating climate change into their broader risk management framework, financial institutions should begin to allocate capital to minimise these risks and properly price those that they choose to accept. If lessons from previous systemic crises are to be learned, it will also improve financial stability in the long term.

“The Taskforce’s stall has been clearly set out in this report, and there is much ground to cover over the next nine months if it is to deliver on its highly ambitious targets and embed climate-related risks firmly within the financial mainstream. This might seem a tall order but, as we’ve seen in the past, the financial services industry is hugely adept at successfully responding to significant market and regulatory challenges – it’s done it before and can do so again now.”

Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk, praised the members of the Task Force on Climate-related Financial Disclosures (TCFD) on the release of their “Phase 1” report. She said: “The TCFD’s plans represent a robust and comprehensive approach to providing investors the information they need. The report does a particularly good job of presenting fundamental principles of climate disclosure, as well as a work plan that emphasizes engagements with investors, NGOs and other stakeholders affected by climate risk. We will continue to encourage the task force to look closely at the need for stronger reporting by energy companies on how their strategies align with limiting global temperature rise to 2 degrees Celsius or less, and to engage with financial regulators and stock exchanges with the power to improve reporting.”

In related news, a consortium of think tanks, researchers and financial sector companies have launched a new project to help investors assess climate change risks.

The new initiative is called the Energy Transition Risk (ET Risk) project and has the backing of a range of leading players. It has a c.€2.2m grant from the European Commission’s Horizon 2020 programme and aims to mobilize capital for sustainable energy investment by developing an energy transition assessment framework which would bring transparency to the materiality of the energy transition risks and opportunities and help investors with data, research and analytics to assess the impact on bond and equity portfolios.

The consortium includes 2° Investing Initiative (the project coordinator), Carbon Tracker Initiative, The CO-Firm, I4CE (Institute for Climate Economics), Kepler Cheuvreux, McGraw Hill Financial [Standard & Poor’s], and the University of Oxford’s Sustainable Finance Programme.