Over recent months several of our clients have been experiencing increasing investor and shareholder pressure around sustainability issues. In part prompted by the TCFD recommendations but also from a drive towards greater transparency around ‘ESG’ issues.
With this in mind, we held a roundtable event on the 23rd January with senior stakeholders from the investor and business community to discuss:
- What are investors looking for in climate-related disclosures?
- How can businesses prepare?
The consensus around the table was that we are not on track to meet the objectives of the Paris agreement, which is to limit the increase in global average temperature to well below 2°C above pre-industrial levels. To reverse this trend in the next decade a global economic correction needs to occur, which is likely to result in significant value disruption.
Investors need to know where they should be allocating capital to support the transition to a low-carbon economy and a 1.5°C world. To do this, companies need to show how they’re actively managing the impacts of climate change and capitalising on the opportunities.
During the discussion, three clear themes emerged:
1) Doing something is better than doing nothing
Investors around the table were clear – i) they do consider ESG performance in their investment decisions and ii) in their view, no ESG disclose equals poor performance. It’s widely recognised that the ESG disclosure landscape is congested, but not disclosing at all is not really an option. We recommend taking a strategic approach and choosing the disclosure frameworks that add most value to your business. Disclosure doesn’t need to be a tick-box exercise, the benchmarking results can be a powerful lever to drive action internally.
2) Embrace transparency
Companies should be embracing the spirit of the TCFD recommendations, which calls for great transparency and certainty over the financial impact of climate change. Companies need to recognise climate-related challenges externally and show stakeholders how they’re managing the risks. Investors don’t expect companies to have all the answers, but they do want to see that you are:
- Focused on the material risks and opportunities
- Open and honest about your environmental impact
- Aligned to a robust climate strategy and setting credible reduction targets
- Incorporating sustainability into your business products or services
3) Manage your indirect impact
To help avoid the worst impacts of climate change, companies must reduce their greenhouse gas (GHG) emissions as much and as quickly as possible. This includes emissions from across the value chain (i.e. scope 3) emissions. Scope 3 emissions often represent the largest portion of companies’ GHG inventories and investors want to know that companies have a handle on it. By addressing Scope 3 emissions companies can unlock new innovations, identify efficiencies and address climate-related risk within their supply chains.
Call to action
Investors are looking out for signals that companies are taking strong climate action. Ambitious commitments, for example setting science-based emission reduction targets or committing to purchasing 100% renewable electricity (RE100), send a clear message to stakeholders that your company is taking sustainability seriously. Without positive action at scale we will not meet the Paris Agreement objectives. Investors at the roundtable emphasized that businesses have a critical key role to play in delivering the transition to a low-carbon economy, they want to see that your company is playing its part.
If you’d like more information on how to maximise your climate-related disclosures in 2019 and prepare for alignment with the TCFD recommendations, sign-up to our webinar on the 14th Feb.
If you have any queries about anything we’ve shared here please do not hesitate to get in touch with our team at firstname.lastname@example.org