EY: Businesses up their game on climate disclosure but are still slow to act on decarbonization

Businesses around the world are starting to improve their disclosure on climate risks but are not yet taking much needed action to address these risks and respond to the needs of investors and customers, according to the latest EY Global Climate Risk Barometer.

The report, now in its fourth year, looks at the extent to which organizations across the globe are reporting on – and taking action to mitigate – their climate risks and opportunities. It examines the efforts of more than 1,500 businesses in 47 countries to publish information, based on the 11 recommendations set by the Task Force on Climate-related Financial Disclosures (TCFD).

According to the Barometer, more organizations are now providing some level of information (better coverage) on each of the recommendations than in previous years. Where a score of 100% would show information being disclosed on all recommendations, this year’s average score is 84% – a steep rise from 70% in 2021.

However, companies are still struggling to improve the quality of their disclosures. The average quality score sits at 44% – just slightly above the score of 42% in last year’s survey. A score of 100% would demonstrate that a company is disclosing all of the details needed. 

Despite burgeoning regulatory and political activity around climate change, and clear improvements in disclosure rules over the past 12 months – including the proposed standards from the newly created International Sustainability Standards Board (ISSB) – businesses are struggling to take practical steps towards decarbonization.

There are slightly more positive signs of progress in other areas. Almost half of organizations surveyed globally (49%) responded that they have conducted scenario analysis – which is also a TCFD recommendation – to examine the likely scale and timings of particular risks and prepare for the worst-case outcomes.

The survey also shows that companies are now giving more balanced consideration to different types of risks than in previous years. They are paying attention to both “transition risks” – stemming from changes in the economy brought about by climate change.

One area in which companies have shown a particular improvement is strategic planning around climate risk. The EY Global Climate Risk Barometer scores organizations’ strategies by examining.

The quantity and quality of disclosure varies widely across the countries surveyed, but as in the previous three reports, countries with rigorous climate disclosure regulation; a proactive investor community; and strong signals from policy makers, tend to see the highest scores.

The report also highlights several steps companies can take to accelerate decarbonization for their own organizations and the wider economy.

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