With the release of the Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD) recommendations, the SSE Model Guidance on Reporting ESG Information has been updated, encouraging exchanges to support its implementation and include it as a resource to educate issuers. To further support the work of the Task Force, exchanges can reference its recommendations in their own reporting guides, provide training, and directly engage issuers, investors and securities regulators.
The Task Force recommends that organizations provide climate-related financial disclosures in their mainstream annual financial filings. Therefore, they have called on stock exchanges, along with other organizations, to support the implementation of these recommendations.
Stock exchanges are strategically placed to promote more sustainable capital markets that generate long-term value. Exchanges that promote transparency and high quality reporting, which include Environmental, Social and Governance (ESG) factors, are helping market participants to understand important drivers of value creation.
Climate is increasingly recognised as a critical issue for investors and issuers alike. The TCFD recommendations recognize the challenges associated with measuring the impact of climate change, but “believes that by moving climate-related issues into mainstream annual financial filings, practices and techniques will evolve more rapidly.” Providing voluntary guidance to issuers on reporting climate-relevant financial disclosures can be a direct and influential opportunity for exchanges to facilitate effective corporate communication, without increasing the regulatory burden on issuers.
With the recent release of the TCFD recommendations, companies now have a common financial language for communicating on climate-related issues with investors. The PRI recently published a series of country-level climate disclosure reviews with the global law firm Baker McKenzie, covering Brazil, Canada, the EU, Japan and the UK. The reviews find that in all markets covered, the TCFD recommendations would assist materially in implementing existing regulation and guidance for investors and companies.
The Sustainable Stock Exchanges initiative has been actively working with stock exchanges globally to ensure all markets provide consistent guidance to issuers on reporting ESG information to investors. The SSE’s Model Guidance is a template that exchanges are using to develop customised guidance for their market. Since the release of the Model Guidance the number of stock exchanges producing their own ESG guide has more than doubled.
Any exchange interested in creating a new reporting guide or updating an existing guide is encouraged to reach out to the SSE initiative.
Views on the FSB TCFD recommendations
“We welcome the report recommendations as they will help establish a valuable framework for investors to understand how the companies in their portfolios are transitioning to a two degrees world. In the past, investors have not had access to this data so the report is a real game-changer for them in terms of being able to more efficiently manage the risks in their portfolios. The PRI will be actively engaging its members on the suggested guidelines, which we also expect them to follow, and, beginning next year, we will be aligning our reporting & assessment framework to the recommendations.” - Fiona Reynolds, Managing Director, Principles for Responsible Investment
“Without a good understanding of how your company is addressing issues related to climate change, investors would be unable to develop a positive view of you.” - Lian Sim Yeo, Special Adviser, Singapore Stock Exchange
“There is no greater risk to society than not tackling climate change – a central element of sustainability. That’s why at Aviva we actively consider climate risks and their potential impact on investors. It’s why we have taken the lead in engaging with companies and at the government level on the need to tackle climate change, including participating in the FSB TCFD. As a supporter of the SSE initiative since its inception in 2009 and chair of the SSE Investor Working Group, Aviva has been working with stock exchanges to enhance disclosure of ESG information for many years. With the launch of the TCFD recommendations, we commend the SSE for updating their own guidance, and encourage exchanges to support the implementation of the recommendations by including them in their own disclosure guidelines.” – Steve Waygood, Chief Responsible Investment Officer, Aviva Investors
“B3 welcomes the TCFD recommendations as it is aligned with our agenda by asking for consistent financial disclosures on material climate related risks and opportunities to be used by investors, lenders, insurers, and other stakeholders. We will include the recommendations in our next updated version of our Novo Valor guide and Gilson Finkelsztain, our CEO, has signed the statement of support and hope to see other business leaders to follow suit.” - Sonia Favaretto, Media Relations, Sustainability, Communications and Social Investment Managing Director for B3
“London Stock Exchange Group’s ESG Reporting Guidance advocates harmonisation of global standards for reporting. The Task Force’s recommendations give a big push to climate disclosure harmonization across jurisdictions, enabling both issuers and investors to report in a comparable way. We therefore call on all exchanges to incorporate the TCFD recommendations into their reporting guidance to help drive better and more consistent disclosure and data globally.” - David Harris, Group Head of Sustainable Business, London Stock Exchange Group
To see more statements of support convened by the TCFD see here.
About the Sustainable Stock Exchanges initiative
The SSE is a peer-to-peer learning platform for exploring how exchanges—in collaboration with investors, regulators, and companies—can encourage sustainable investment and enhance corporate transparency, and ultimately performance, on ESG (environmental, social and corporate governance) issues. The SSE is convened by the UN Conference on Trade and Development (UNCTAD), the UN Global Compact, the UN Environment Program Finance Initiative (UNEP FI), and the Principles for Responsible Investment (PRI). For more information on specific exchanges’ sustainability efforts, how to become a Partner Stock Exchange, and further opportunities to advance the integration of sustainability within capital markets, visit www.sseinitiative.org