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September 26, 2019 Jim Coburn Disclosure Our research shows that what investors expect of corporate reporting on environmental, social, and governance issues is driven by pressing concerns like the climate crisis and water scarcity that pose significant financial risks. Stock owners we work with view ESG reporting as a way for companies to internally manage risks, as well as opportunities such problems always imply, and to provide investors and other stakeholders with important information.
The Task Force on Climate-Related Financial Disclosures has garnered support from over 630 companies and investors responsible for assets of over $107 trillion. A key element of the TCFD’s disclosure recommendations is climate scenario planning, in which companies describe their strategies for being resilient in the face of such risks and for seizing opportunities in the transition to a low-carbon economy. For larger energy firms, the TCFD has especially high expectations, using the limit on warming of 2°Celsius (or lower) and other robust scenarios.
To date, American companies have provided climate scenario disclosures mainly in stand-alone reports or sustainability reports, and not in financial filings or proxy statements. This gap is unsurprising, as the methodologies and preferred outputs vary widely and are still in development. But scientific, policy, and market developments and increased pressure from investors have resulted in more detailed disclosures from some companies.
For example, the findings in the Intergovernmental Panel on Climate Change’s special report on warming of 1.5°C include the need for the power sector to achieve net zero emissions before 2050 and supply clean energy to support a broader range of uses. At the same time, 29 states have renewable portfolio standards for utilities, which account for about half of the growth in U.S. renewable energy generation since 2000.
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