IOSCO under fire for failure to set direction for climate risk disclosure

The organisation responsible for guiding securities regulators around the world has been accused of failing to set a clear benchmark for climate risk disclosure practices, with pressure mounting on the body to formally endorse the guidelines set out by the Financial Stability Board's (FSB) Task Force on Climate-related Financial Disclosures (TCFDs).

Check out BusinessGreen's upcoming event on how to navigate the TCFD maze.

A new report published this week by environmental law firm ClientEarth, analyst house Carbon Tracker, and NGO WWF, suggests investors with a global portfolio are struggling with differing disclosure standards between countries, which make it difficult to accurately assess and compare the climate risks of investments.

The TCFD recommendations, released in 2017, seek to provide a clear set of international guidelines for companies to follow when disclosing the level of climate risk faced by their business, so investors have an accurate and comparable information base to work from when allocating capital.

But IOSCO, the international body which brings together securities regulators, has failed to formally endorse the TCFD recommendations, despite it being the best-placed body to harmonise climate risk reporting, the report argues.

"Inconsistent climate risk reporting is a problem for global investors," explained ClientEarth lawyer Dave Cooke. "Many large asset managers have expressed concerns about the inconsistent climate risk disclosure leading to capital misallocation and the build-up of systemic risks. As such, they have a strong basis to demand action on this subject from IOSCO - and it is in their interests to do so."

"Getting IOSCO to wield its influence has the potential to shape global progress on management and disclosure of climate risk," he added. 

The findings echo concerns from the EU's High Level Expert Group on Sustainable Finance, which earlier this year said IOSCO has "for far too long remained silent on an issue [sustainability disclosure] at the core of its business". 

Senior investment executives and experts also joined the calls for IOSCO to act on the issue. Meryam Omi, head of sustainability and responsible investment strategy at Legal & General Investment Management, stressed the important role guidelines have to play in accelerating investor action to tackle climate change. "Raising the standards of climate disclosure, led by IOSCO, is an essential step in helping investors build a low-carbon and sustainable future," she said.

Meanwhile Robert Schuwerk, North America director at influential analyst house Carbon Tracker, warned that without clear disclosure standards investors have limited long-term insight into future performance. "Without action, the financial impacts from climate change will be severe but unpredictable and investors are calling for disclosure to help them navigate an uncertain path," he said.

IOSCO declined to respond to the comments. But the body is due to meet in September, and campaigners hope it will use that opportunity to announce plans for formal work on climate risk.

For businesses wanting to learn more about how the TCFD recommendations work and their potential to shape firms' environmental reporting and green strategies, BusinessGreen is hosting a half day conference on the topic on September 21.

Taking place at One Moorgate Place in central London, the TCFD Leaders Briefing will bring together a host of leading experts and high profile keynote speakers, including chair of the Environmental Audit Committee Mary Creagh MP, CEO of Hermes Investment Management Saker Nusseibeh, and head of sustainability at Landsec Caroline Hill.