THE MAJOR banks have ticked some of the boxes on the Task Force on Climate-related Financial Disclosures’ (TCFD) detailed guidance but have ignored many of the recommended elements of reporting.
This was according to the latest investor briefing by non-profit shareholder activism organisation, Just Share, on an analysis by them of the most recent climate risk-related disclosures of Investec, FirstRand, Standard Bank Group, Nedbank Group and Absa Group, and assessing them against the recommendations of the TCFD.
The TCFD, created in 2015, is a consistent climate-related financial risk disclosure standard for use by companies, banks, and investors in providing information to stakeholders.
“Recognising that all five banks are still in the early stages of TCFD reporting, we have highlighted what we believe to be the most important focus areas for banks in their next set of climate-related disclosures,” Robyn Hugo, Just Share Director: Climate Change Engagement said in a statement.
Under governance disclosure, the general practice of the banks was to provide a non-specific overview of the board’s role and to leave out other details required by TCFD guidance, the analysis showed.
In future reports, Just Share intended to evaluate details on how the board monitors and oversees progress against goals and targets on climate-related issues.
“In our view, compliance with this guidance point requires a description of the goals and targets on climate-related issues; how often they are reviewed by the board and the relevant committee; and what measurable metrics/indicators the board and the relevant committees use to monitor progress against goals and targets,” the report said.
The banks performed better in assigning climate-related responsibilities to management-level positions or committees; but disappointed in providing information to comply with the other guidance points such as those describing organisational structures, processes by which management is informed about climate-related issues, and how management monitors climate-related issues.
Banks did not fare well on discussing where they believe their strategies may be affected by climate-related risks and opportunities and how their strategies might change to address such potential risks and opportunities.
Under strategy disclosure, banks performed best at providing a description of the specific climate-related issues potentially arising in the short-, medium-, and long- term that could have a material financial impact on the organisation, but there was variable compliance in describing “the process(es) used to determine which risks and opportunities could have a material financial impact on the organisation”.
Banks also did not do well in providing any of the requested information on their financial planning, which includes: how climate-related issues serve as an input to their financial planning process; the time periods used; how these risks and opportunities are prioritised; and the impact of climate-related risks and opportunities on financial planning in different areas such as operating costs and revenues and access to capital.
“Currently, the banks are mostly at the inception stage of scenario analysis,” the report said.
The banks performed worst in relation to the risk management area. Two requirements that none of the assessed banks attempted to meet were the disclosure of processes for assessing the potential size and scope of identified climate-related risks and the disclosure of processes for prioritising climate-related risks.
Just Share suggested the banks, in their next round of disclosures, should dedicate most of their effort to this thematic area, together with the strategy disclosures.
edward.west@inl.co.za
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