Climate change poses significant risks to the world’s business, organizations, and markets, but current financial reporting practices do not adequately address that threat, according to a report Wednesday from the Group of 20 nations Task Force on Climate-related Financial Disclosures. “The Task Force developed four widely adoptable recommendations on climate-related financial disclosures that are applicable to organizations across sectors and jurisdictions. Importantly, the Task Force’s recommendations apply to financial-sector organizations, including banks, insurance companies, asset managers, and asset owners,” the report says.
The task force’s recommendations for standard climate-related financial disclosures are:
- “Disclose the organization’s governance around climate related risks and opportunities;
- Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning;
- Disclose how the organization identifies, assesses, and manages climate-related risks; and
- Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities.”
According the report, “Recognizing that climate-related financial reporting is still at an early stage, the Task Force’s recommendations provide a foundation to improve investors’ and others’ ability to appropriately assess and price climate-related risk and opportunities. The Task Force’s recommendations aim to be ambitious, but also practical for near-term adoption.”