Climate-related financial disclosure

Should companies be more transparent about how their investments and assets are exposed, or contribute to climate-related risks? An answer to these and related questions is sought in an increased number of for a, ranging from the EU institutions, to the G20, and at central banks around the world. Mark Carney, governor of the Bank of England, framed the issue as a “tragedy of the horizons”, where a failure to account for the climate implications of investments today can constrain our choices and prosperity in the future. As the chair of the Task Force on Climate-related Financial Disclosure (TCFD), Carney led the work that brought together investors, financial institutions, regulators and policy-makers whose recommendations will now be discussed at the G20 meeting in July, and in the EU through the work of the HLEG (ADD). The key objective is to ensure that climate risks are well priced by markets, thereby improving efficiency in asset allocation and ensuring that there are no risks to systemic stability, that may arise if the world recognises such risks at a later stage which in turn would lead to a much more sudden and disruptive transition to a low-carbon economy. To prevent this, the European Systemic Risk Board also pays increasing attention to climate risks. Increased disclosure and transparency of such risks can play a role in mitigating these risks.