Companies and investors support climate disclosure

This piece is part of our ‘Climate Policy Engagement’ series. To ensure integrity and accelerate meaningful progress towards halving global emissions by 2030, Race to Zero encourages members to align external policy and engagement, including membership in associations, with the goal of halving emissions by 2030, that is to say ‘Persuade’. A key part of climate policy engagement can relate to climate-related disclosures.

Disclosure is a key enabler 

Climate-related disclosures are a key enabler for climate action. Transparency means showcasing where greenhouse gas emissions are being reduced (and where they need to be), and where to build resilience against climate impacts. Disclosure also ensures investors have the right information to make investment decisions that support the scaling of climate solutions. 

While companies have been voluntarily disclosing through platforms like CDP for 20+ years, there has been a drastic recent shift in the last two years to standardise disclosure through frameworks like the ISSB – and to make it mandatory for significant corporations across the European Union and the United States to disclose climate opportunities and risks. While disclosure rules differ in their scope and coverage, a number of leading businesses and investors have played a key role in maintaining the ambition behind regulatory disclosure. 

Hundreds of companies support the CSDDD

In May 2024, the European Union finalised the Corporate Sustainability Due Diligence Directive (CSDDD). This directive requires companies to ensure that human rights and environmental obligations are respected along their chain of activities. A key element of the directive is that qualifying companies will be required to develop and deploy a credible climate transition plan.

While the scope of the CSDDD was watered down, high-impact sectors removed, and revamped director duty provisions were omitted, the legislation is a step-change in sustainability being legally recognised as at the core of business. An important driver for the CSDDD getting over the line was the support received from influential stakeholders sitting outside of government. From Belgium, to Sweden, to Italy, to the Netherlands, companies, associations and others came out in strong support of this corporate responsibility law. Their letters referred to levelling the playing field towards sustainable value chains. Race to Zero companies were among those leading the charge – such as Danone, IKEA, Triodos Bank, Storebrand, H&M and GSK. Accelerators B-Lab and CLG Europe also played an important convening role, alongside the Initiative for Sustainable and Responsible Business Conduct (we-support-the-csddd). 

Kamil Zabielski, Head of Sustainable Investment at Storebrand Asset Management on the European Corporate Sustainability Due Diligence Directive, comments:

It’s a win that we now have a law in place, holding the biggest companies with global footprints accountable for preventing, mitigating and remedying human rights and environmental abuses within their supply chains.

Investors supporting comparable climate reporting through the SEC 

On March 6, 2024, the U.S. Securities and Exchange Commission (SEC) adopted its landmark climate disclosure rule, The Enhancement and Standardization of Climate-Related Disclosures for Investors. The rule responds to investors’ need and overwhelming demand for clear, consistent, and comparable climate reporting from companies. Standardised disclosures in financial filings will bring significant improvements to the current patchwork of voluntary disclosures.

“We are supportive of practical action taken by policymakers and regulators around the world and welcome the long-awaited climate risk disclosure rule proposed by the US Securities and Exchange Commission”, says Michelle Scrimgeour, CEO, Legal and General Investment Management (LGIM). She added:

Clear and joined up international disclosure regulation is critical if companies and economies are going to transition to net zero by 2050.

Institutional investors have been pressing for mandatory disclosure for more than a decade. Investors — large and small — have noted the difficulty of assessing firms’ climate risk without standard, comparable, and mandatory disclosure. The Investor Agenda’s 2021 Global Investor Statement to Governments on the Climate Crisis was a significant persuasion effort, where 733 investors, responsible for $52 trillion in assets under management, called for mandatory, Task Force on Climate-related Financial Disclosure (TCFD)-aligned climate risk disclosures, among other key climate policy asks. While the final disclosure rules have limitations around scope 3 and do not go as far as other international standards, it is an important step forward. 

Front-footing regulation 

In the face of adversary fossil fuel companies who are blocking climate progress (InfluenceMap), it is even more helpful that leading companies and investors in the #RacetoZero are endorsing and shaping climate disclosure rules that they will seek to implement. 

Overall, there is strong support from regulators and investors alike for the introduction of a global baseline of disclosures so that companies can be compared with peers globally. With more than 20 jurisdictions (including Australia, Brazil, China, Canada, Japan, Singapore, Nigeria and the UK) who have signalled an intention to adopt ISSB, representing more than half of the world’s greenhouse gas emissions, companies around the world will want to be on the front foot of incoming disclosure regulation.