Breakingviews - Mark Carney’s green push needs disclosure stick

Mark Carney, Governor of the Bank of England, poses for a portrait during an interview with Reuters, in London, Britain February 13, 2020. Picture taken February 13, 2020.

LONDON (Reuters Breakingviews) - Mark Carney, the outgoing boss of the Bank of England, wants companies around the world to spell out how they plan to cut carbon emissions. More reliable and comparable information on climate-related financial risks facing each business would certainly help investors to hold chief executives to account, but right now such disclosure is decidedly optional. The question is whether Carney will use his forthcoming role as United Nations climate envoy – and the UK’s hosting of November’s global climate summit – to push for it to become mandatory.

Four-fifths of the top 1,100 global companies already disclose climate-related financial risks in line with some of the recommendations issued by a task force that was set up in 2015 by the Financial Stability Board, which Carney was chairing at the time. The aim of this so-called Task Force on Climate-Related Financial Disclosures (TCFD) was to develop voluntary standards that would give valuable information to investors, lenders, and insurers on a variety of risks associated with climate change. But there’s a lot more work to do.

Only around 25% of companies issued information that was aligned with more than five of the task force’s 11 recommended disclosures and only 4% of companies disclosed information aligned with at least 10 of the recommended disclosures, according to a June 2019 TCFD report. There’s a particular lacuna when it comes to disclosing how resilient the company’s strategy would be under different climate-related scenarios. That’s a problem for investors.

Supporters of the TCFD standards control balance sheets totalling some $120 trillion and include the world’s top banks, asset managers such as BlackRock, pension funds, insurers, credit rating agencies and shareholder advisory services. Many of them want a general increase in the availability of disclosure as well as disclosure of standard industry-specific metrics. Quite a few also want companies to reveal the scenarios and assumptions used. Comparing apples with oranges is little use, after all.

In an interview with Reuters and Breakingviews published on Friday, Carney said one thing to be considered before UK climate talks that will be held in November, known as COP26, is whether to make the TCFD framework compulsory – not overnight but over time through listing requirements or securities regulation disclosure standards. A stick would definitely help the Canadian’s green push.

Unfortunately, COP26 is also supposed to be where each country’s delegates revisit and upgrade their national targets for cutting emissions. Getting any sort of improved results from what will be tortuous negotiations will expend huge amounts of political capital. The risk is that Carney’s laudable project gets lost in the fog.


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