Information moves markets, but bad information hurts investors and companies alike. Investors need companies to disclose accurate information about today’s challenges, among the biggest being global climate change.

The trick is that financial reporting has to evolve. Issues that have a financial impact on companies aren’t static. They must reflect the fast-changing real world that companies are doing business in.

That’s why the work of the Task Force on Climate-related Financial Disclosures (TCFD), chaired by Michael Bloomberg, is so vital. The international task force was created by the Financial Stability Board at the request of the G20 nations to fill an urgent need—to adapt financial disclosures to an economy being shaped by climate change, policy responses and a low-carbon energy transition.

In December, the group released recommendations—for public comment—designed to help companies and investors figure out which climate risks have a financially material impact on their business so they can disclose those impacts in public financial filings. The task force also found that in most G20 countries today, companies already have “a legal obligation to disclose material risks in their financial reports—which includes material, climate- related risks.”

The recommendations are a big step forward. Among the reasons why is that they were crafted by the business community, which gives task force member companies a key role in improving their climate disclosures and encouraging their peers to do the same.  As the task force noted, “the success of these recommendations depends on near-term, widespread adoption by organizations in the financial and non-financial sectors.”

The TCFD has laid out a five-year path for full implementation, an ambitious scenario that will depend on leading companies to start implementing the recommendations this year.

We have worked closely with the task force over the past year and are impressed by the TCFD’s general and sector specific recommendations. Based on our work on climate and water risks in the most affected sectors, we provided the task force with these additional recommendations in response to their request for public comments:

1. Improving scenario analysis

The cornerstone of the task force’s recommendations is requesting scenario analysis by companies in all industries, a huge step forward by any measure. Building on the Paris Climate Agreement’s goal to keep global temperatures from rising no more than 2°C, the report advises businesses to assess the potential impact of a 2 degree warming economic scenario on their long-term strategies. Put simply, substantial greenhouse gas reductions will be needed to achieve a 2-degree world and all businesses, especially in energy-intensive sectors, will be profoundly affected.

In our feedback to the task force, we emphasize two issues: first, the positive effects of companies developing their own scenarios, as long as they report how and why their scenarios diverge from publicly available scenarios, which will add to investor and public understanding of pricing risks and opportunities from the energy transition.  Second, companies should disclose key inputs and assumptions of their scenario analyses, so investors can fully understand the process and limitations of the assessment.  We also suggest that the task force consider recommending to companies Ceres’ Framework for 2 Degrees Scenario Analysis, which includes key components for any 2 degree scenario and guidelines companies can use to develop scenarios.

2. The dual role of insurance companies as underwriters and investors

The task force offered important new recommendations for insurance companies to assess and disclose their climate risks and opportunities. Because insurers play a dual role—underwriting hundreds of billions of dollars of risk and investing the money that clients pay to them—we suggest that the recommendations specifically spell out that insurance companies should provide disclosure on both sides of their businesses.

This recommendation also applies to scenario analysis. Both sides of insurers’ businesses should use the 2C warming scenario as a model for analyzing and integrating climate risks and opportunities.

This would help investors get a more complete picture of insurers’ relative competitive positioning on wide-ranging climate trends. For instance, an insurance company that underwrites a significant amount of oil and gas business and also has extensive oil and gas investments could find its revenues under pressure if global oil and gas demand and prices drop, or if severe storms impact coastal oil and gas infrastructure.

3. Decision-useful reporting on water risks

We appreciate the task force’s discussion of companies in sectors facing climate-related water risks like droughts, heavy rainfall, flooding and water scarcity.  In our response to the TCFD consultation, we suggest the task force provide clear guidance to companies on how they can disclose water issues.

In order to be meaningful, water data cannot be reported only on a global basis, but must be contextualized against specific risks or stresses. Company data points that are not broken down to the asset or geographical level, nor contextualized against risk and stress exposures, are short-changing investors.

4. Reporting on land use change from deforestation

Better land use management is needed to limit climate warming, protect water quality and maintain crucial water resources—all critical business issues. For the agriculture and forestry sectors, we suggest that the task force recommend additional indicators to encourage better reporting.

While we agree with the task force on the importance of tracking emissions triggered by land use, emissions tracking methodologies for agriculture are still evolving. We suggest that the TCFD recommend additional, concrete metrics that are already available, so companies can give investors insights about their supply chain risks and risk management practices. For instance, businesses could report on the volume of commodities, such as soy, beef, palm oil and timber, that they use or produce that are linked to deforestation, and report what percentage of crops are grown in regions with high deforestation risks.

Moving to adoption

Added together, we are big champions of the breakthrough work the task force is doing on climate disclosure, but the next steps will be crucial. Getting these recommendations adopted by companies and investors, and endorsed by countries, will depend on leadership from the G20 and financial groups. And countries must move quickly to improve climate risk disclosure by publicly traded companies in financial filings, as the U.S. Securities and Exchange Commission has done with its 2010 climate disclosure guidance.  Without such requirements, investors will not get the comparable, quantified reporting that they need to support investment decisions.

The task force recommendations deserve widespread adoption precisely because that will help markets thrive. With full disclosure of both climate risks and opportunities, economies can continue to prosper as they transition to a much-needed low carbon future.

Meet The Experts


Jim Coburn

Senior Manager, Disclosure

Jim Coburn directs Ceres’ efforts to improve mandatory climate and sustainability risk disclosure by corporations. Drawing from his legal background, Jim helps to develop rules and guidance on reporting that strengthen corporate risk management practices and improve investor decisions. He led the initiative that resulted in the SEC’s issuance of groundbreaking climate disclosure guidance for corporations in 2010.

In addition to leading regular engagements with members of Ceres’ Investor Network on Climate Risk and Sustainability and the SEC on disclosure issues, Jim also manages Ceres’ involvement in the Climate Disclosure Standards Board and work related to the Task Force on Climate-related Financial Disclosures.

Jim manages Ceres tools and reports on climate disclosure, including the SEC Sustainability Disclosure search tool. He co-authored Cool Response: The SEC & Corporate Climate Change Reporting, which outlines generally weak climate disclosure to date by businesses and steps the SEC can take to improve reporting.

Jim has organized Ceres webinars to educate investors and companies on best practices for disclosure. He often speaks to the media on disclosure-related issues, and has been quoted in The Wall Street Journal and New York Times and has served as a panelist at numerous events.

Before joining Ceres, Jim worked for Morgan Stanley, the American Civil Liberties Union and Green America. He holds a BA in Government from Cornell University and a JD from Boston College Law School. He is a member of the Massachusetts Bar.