Research shows that while companies are increasingly talking about climate change in their financial statements, the quality of their disclosures and any decisions to take action are not progressing as fast.
EY assessed over 1,500 businesses in 47 countries against the 11 recommendations set by the Task Force on Climate-related Financial Disclosures (TCFD). Companies were scored on the number of recommended disclosures that they make (coverage) and the extent or detail of each disclosure (quality). A score of 100% would demonstrate that a company is disclosing all of the details needed.
The countries with the best quality of disclosure include South Korea and Ireland, as well as several in Southern, Central and Eastern Europe, with the UK scoring highest of all on both quality and coverage.
However, the research shows businesses are struggling to take practical steps towards decarbonisation.
A larger proportion are starting to think more closely about how to report on and mitigate the impact of climate change.
EY argues that company boards and senior management teams should be using their disclosures to inform stakeholders, particularly investors. They can show how they are understanding and managing their risks in practice, rather than simply treating scenario analysis as a theoretical analysis of the potential impacts of climate change on the current business model.