Post #47
June 2, 2021
Claire Bodanis
Last week was heralded as a great moment for tackling climate change, with some big moves against fossil fuels – but we’re far from winning the war. Claire considers what this might mean for companies, and how proper engagement with TCFD (Task Force on Climate-Related Financial Disclosures) can help.
My best friend (theologian Anna Rowlands of blogpost Lunch with the Pope fame) was on Thought for the Day* this morning. Her theme was solidarity, and what struck me about it was how solidarity – with another person, a thing, a cause – requires more than just words, even vehement ones, of support. True solidarity involves a willingness to make sacrifices for a greater mutual gain.
So far, so obvious. But why it struck me particularly this morning was because, in the last few weeks, I’ve had more and more questions from people about how to deal with reporting against TCFD – the Task Force on Climate-Related Financial Disclosures. No doubt because it’ll be mandatory for UK premium-listed companies from the coming year, and, on current advice, for all UK listeds by 2025.
What I’ve been saying to everyone who asks is that TCFD isn’t an end in and of itself. It isn’t – or shouldn’t be – just another irritating disclosure which prompts a screed of boring boiler plate blah (although you might be forgiven for thinking so, given much of what passes for TCFD reporting at the moment). Rather, just like any other aspect of reporting, we need to think about why we’re being asked to do it in the first place. The clue is in the title – climate-related financial disclosures. What are you, company x, doing about climate change? What effect – for good or ill – is climate change having, or will it have on your business? What are the risks and opportunities to you and your stakeholders? And how do you think these will play out in that ultimate measure of capitalist corporate value, your finances?
The good people who devised TCFD clearly did not want companies to pay lip service to the problem of climate change through reporting, but actually do something about it. Hence the requirement to report on four aspects: governance, strategy, risk and metrics/targets – all of which you need to do something about to be able to report on them properly. And this is where the notion of solidarity and sacrifice for the greater good struck a chord with me today.
Last week was heralded as a great moment for shifting the world on climate change, as fossil fuel companies found themselves on the wrong end of legal and investor action. On Wednesday, activist investors forced climate dinosaur Exxon Mobil to appoint at least two of its four proposed directors in one of the most shameful shareholder meetings, on the part of a company, I’ve ever come across (read Bob Eccles’s ringside-seat review in Forbes). On the same day, Chevron’s shareholders voted against the board to force through a proposal to reduce emissions. And here in Europe, on Thursday, the Dutch courts ordered Shell to cut emissions by 45% by 2030, from 2019 levels. All this followed the 21 May agreement by the G7 to stop all new financing of international coal projects.
But it’s not time to cheer just yet. Less well publicised was May 24th’s joint letter from 14 Republican states (plus so-called ‘Democrat’ state West Virginia) to the US’s climate envoy, John Kerry. The letter railed against the Biden Administration’s efforts to stop US financial institutions and banks from financing fossil fuel companies. According to these states’ treasurers, such companies ‘provide jobs, health insurance, critical tax revenue, and quality of life to families across our country’ and are ‘law-abiding industries that are essential to the economy and our citizens’ way of life’. Absolutely true, up til now.
But what they are missing of course – and I struggle to understand how any educated person can miss this – is that doing nothing now, and enabling these companies to continue quite legally to wreck the environment, will destroy any chance of a decent future for any of us, not least those citizens these states claim to be protecting. So it was good to see realism alive and kicking in Tuesday’s FT’s big read on climate change and EU carbon pricing – both in terms of the urgency to act now, and a recognition that acting will involve some pretty difficult trade-offs. It concluded by quoting Michael Pollitt, professor of business economics at Cambridge. He said: ‘Achieving net zero in a 30-year timeline is a historic transition and politicians need to stop pretending that it can be done for free.’
Not just politicians though. We must all stop pretending it can be done for free. What does that mean for companies? First, admitting that climate change means short-term pain. Second, working out what sacrifices are needed now for greater (long-term) mutual gain – and, I hope, coming up with a plan to share those sacrifices rather than just passing on their costs. And third, being honest about it all through reporting. This is where proper engagement with TCFD, and using its principles to prompt changes in strategy, can help companies do their bit to help us all be in solidarity with the cause of tackling climate change.
Next TMIL webinar – Thursday 1 July – on climate risk reporting, sign up at www.trustmeimlisted.com/webinars.
* For our non-UK readers, Thought for the Day is a slot on the BBC Radio 4’s weekday morning current affairs programme, Today, offering ‘reflections from a faith perspective on issues and people in the news’. You can listen here – and if you want to hear Anna’s TFTDs, just search ‘Anna Rowlands’.