by Matt Davies
December 17, 2023
The 2023 edition of the EY Global Climate Risk Barometer, released this week, suggests a “deep disconnect” between companies’ climate and corporate strategies.
Now in its fifth year, the EY Barometer “measures companies on the number of recommended disclosures that they make (coverage) and the extent and detail of each disclosure (quality).”
For this year’s edition, the report authors looked at over 1,500 businesses in 51 countries to assess their performance disclosure against standards set by the Task Force on Climate-Related Financial Disclosures (TCFD).
“This year’s Barometer report shows there are both leaders and laggards when it comes to disclosure, with complexity existing regionally and across sectors,” said Dr. Matthew Bell, EY’s Global Climate Change and Sustainability Services Leader.
So how deep is the disconnect?
According to the report, a staggering 47% of companies fail to disclose a transition plan despite making climate commitments.
A deeper concern emerges as 74% of surveyed organizations neglect to include the quantitative impacts of climate risk in their disclosures. This, EY writes in the report, implies that “climate change is not being considered in the same way as other material impacts and reflect[s] a broader trend for climate strategy to remain separate from corporate reporting.”
While the report acknowledges a 6% year-on-year improvement in both coverage and quality of disclosures, notably in developing economies, the speed of transformation “remains too slow as we reach a point of no return where improvements in disclosures are not enough, and transformative corporate action is required at scale.”
Disclosures “continue to move in the right direction,” reaching 90% in 2023 compared to 84% in 2022, but their quality remains stagnant at 50%, with a marginal 6% year-on-year improvement driven “only by the need” to prepare for the impending requirements of the new International Sustainability Standards Board (ISSB) regulation, according to the report.
The report also exposes a lack of granularity in reporting and the efficacy of associated regulations. The UK (66%), Germany (62%), France (59%), Spain (59%), and the US (52%) lead in climate-related disclosure quality, while India (36%), China (30%), the Philippines (30%), and Indonesia (22%) are identified as requiring substantial improvement.
“Unsurprisingly, countries with rigorous disclosure regulation and an engaged investor or policy maker community continue to move forwards, drawing on the recent TCFD disclosures and readying themselves for the new ISSB requirements,” Dr. Matthew Bell said, adding:
“Markets where there is a lack of any mandatory climate disclosure requirements pull the average down, and until this is addressed, scores will remain low.”
As the world stands on the precipice of irreversible climate impacts, the EY Global Climate Risk Barometer issues a clarion call for corporate leaders to bridge the chasm between climate pledges and tangible actions.
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The urgency for comprehensive disclosure, robust transition plans, and adherence to evolving sustainability standards is more pressing than ever. The fate of our planet hinges on corporate responsibility.