Boards can drive more robust climate risk disclosures

CLIMATE risks are moving up the boardroom agenda as companies face increasing pressure to tackle climate change more proactively. Investors are increasingly interested in how organisations plan to contribute to a decarbonised economy and would reconsider or even walk away from investments based on climate risk. Likewise, employees, customers and other stakeholders expect corporate leaders to lead the way in addressing climate change.

With the fast-growing urgency of climate action, businesses must understand their climate risks and opportunities, speed up their implementation of climate strategies and communicate their performance. Amid this shift, companies continue to make progress in both the quality and coverage of their climate-related financial disclosures, according to the June 2021 EY Global Climate Risk Disclosure Barometer. The research draws on companies' public disclosures - such as in annual reports, sustainability reports and CDP responses - on the uptake of the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and covers more than 1,100 companies across 42 countries.

But the quality of these disclosures still lags behind coverage of the TCFD recommendations, and Singapore is no exception. An analysis of more than 90 listed and non-listed companies across 11 sectors in Singapore found that while the companies' disclosures covered 45 per cent of the TCFD recommendations on average, the average quality score across the organisations was only 18 per cent of the maximum quality score across the 11 recommendations. These findings suggest that companies in Singapore still find it challenging to come to grips with their exposure to climate risks and act on it.