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.”
What the future holds for sustainability reporting
- 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.”