Companies producing climate-related disclosures are still not translating that information into practical strategies to accelerate decarbonisation.

The latest EY Global Climate Risk Barometer reveals that of the corporate reports analysed, the score for coverage of TCFD recommendations was 84 percent, a steep increase from 70 per cent in 2021, but as coverage scored highly, the average score for quality was just 44 per cent.

EY contends that the gap between coverage and quality suggests that while more companies are reporting on climate risk, they are not actually providing meaningful disclosures around the challenges they face.

The research also highlights that certain markets, and certain sectors, are clear leaders when it comes to climate reporting, while others are notable laggards. From a market perspective, the UK tops the list in terms of both coverage (99 per cent) and quality (62 per cent). It is followed closely by Japan, which has a coverage score of 96 per cent and a quality score of 56 per cent. These scores are indicative of the mandatory disclosure requirements of those markets. The Middle East performs worst on the Barometer in terms of both disclosure coverage and quality, reflecting its less mature regulatory framework for ESG reporting.

From an industry sector perspective, it is no surprise that the sectors with the most exposure to transition risk generally score higher for their disclosures. Energy has the highest coverage score at 93 per cent. However, the agriculture, food and forest products sector lags behind most others in terms of both coverage and quality of disclosures, suggesting that the sector is still wrestling with the sensitive issues of transition plans and the potential impact of climate-related risks and opportunities on its business.

The report concludes that whilst companies are improving the coverage and quantity of their climate disclosures, they are only making limited progress on integrating their climate reporting with their financial statements. This may help to explain why disclosures do not appear to be accelerating the decarbonisation process: Their financial relevance is not clear.

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