Thanks to quarterly earnings reports, the finances of large publicly-traded companies are fairly transparent these days. Now, a new campaign is aiming to do the same thing but with effects on climate change, rather than earnings. In other words, the public is about to gain insight into some of the biggest companies' climate change strategies, giving consumers the ability to hold these large businesses more accountable than ever.
The Task Force on Climate-Related Financial Disclosures (TCFD) is an international campaign chaired by billionaire and former New York Mayor Michael Bloomberg. According to its own website, the TCFD develops "voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders". Put simply, the campaign aims to increase transparency around how companies contribute to — and respond to — climate change. Some participating companies include JPMorgan Chase, Shell, Daimler (the owner of Mercedes-Benz), Bank of America, and Burberry.
The TCFD has developed a total of four recommendations on climate-related financial disclosures, structured around an organization's governance, strategy, risk management, and metrics. The disclosures are meant to reveal not only what a company's strategy is to combat climate-related risks, but also how it measures those risks.
So, you probably know that large corporations pose a risk to the environment, but how climate change affects those companies is a little trickier. According to one report sponsored by the TCFD, for example, certain sectors could be especially impacted by climate change. Banks, for instance, could face lawsuits by providing loans to certain fossil fuel producers or agricultural companies. Climate change can also pose more obvious physical risks, such as claims from floods and storms.
Ultimately, climate change is already proving incredibly costly, and this fact is the most compelling to many large corporations. Mark Carney, the governor of the Bank of England, is also spearheading the initiative.
According to Mark Carney, the governor of the Bank of England who is also spearheading the initiative, the number of registered weather-related loss events has tripled since the 1980s. Insurance losses from these events have increased from $10 billion in the 1980s to roughly $50 billion over the past decade. On top of that, in Manhattan alone, a 20 centimeter rise in sea level (since the 1950s) increased losses from Superstorm Sandy by 30%, according to Carney. He added that investors are also at risk, facing "huge losses" from climate change inaction.
The worldwide fight to lower carbon emissions hit a halt earlier this year, when President Donald Trump announced he would withdraw the United States from the landmark Paris Agreement. The climate agreement, which aims to reduce global greenhouse gas emissions, has now been signed by every functioning state except for the United States.
But Bloomberg, for one, isn't discouraged, telling an audience during a Paris climate summit on Monday that Trump's actions have served as "a rallying cry for the pro-environmentalists groups. And that has been very helpful."
As chair of TCFD, Bloomberg and his organization are aimed at getting companies to disclose the risks they pose to climate change. The benefit is two-fold, the group says, in that it allows for more transparency and it's just good business. Better access to climate-change-related data can help companies more effectively measure their own impact and will help investors make more informed decisions. Plus, as Bloomberg noted, if investors like what companies are doing to combat climate change, "they'll get a higher valuation, their stock will go up and bonuses will be bigger."
So far, 237 companies have pledged to come clean about their carbon footprints, or their impact on the environment. And based on Bloomberg and Carney suggest, it's a win-win situation for both the participating corporations and the environment.