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KPMG Towards Net Zero

Climate scenario analysis is a steep learning curve

“Scenario analysis is one of the key recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Financial stakeholders need forward-looking information to help them understand what may be coming down the line for their portfolios in terms of climate-related risks and opportunities.

Yet, detailed, longer term, forward-looking reporting has not been the norm for companies that have traditionally provided retrospective information along with short-term earnings forecasts. Adopting a sophisticated forward-looking view on reporting of climate risk is, therefore, a significant culture shift for many companies, most of which likely lack in-depth subject matter expertise on their teams. This is a steep learning curve that companies need to climb quickly.”

The time has come

What the future holds for sustainability reporting

“In recent years, momentum has grown behind increased coalescence of the major non-financial reporting standards. Investors have started to join the discussion and reporting businesses have expressed frustration over the lack of harmonized standards for non-financial reporting. Current initiatives at the time of publishing the KPMG Survey of Sustainability 2020 include:
  • The European Union is updating the EU Non-financial Reporting Directive and is considering developing non-financial reporting standards
  • The World Economic Forum has released its paper on common ESG metrics and consistent reporting for sustainable value creation, defining 21 core metrics
  • The five major non-financial reporting organizations (GRI, SASB, IIRC, CDSB and CDP) have published a Statement of Intent, committing to work together towards comprehensive corporate reporting. SASB and IIRC have announced an intention to merge.
  • The IFRS Foundation’s consultation on establishing a global non-financial reporting framework has received strong support from other organizations, including IOSCO.

By the time the next edition of the KPMG Sustainability Reporting Survey is published, we expect to see a significant shift in global sustainability reporting practice driven by the above factors. We predict a further tightening of focus of non-financial reporting on investors’ needs, more harmonized reporting based on common metrics and further coalescence towards a global corporate reporting system. The time has come.”

  

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