The Technical Expert Group on Sustainable Finance set up by the European Commission (EC) has published its first report on companies' disclosure of climate-related information.

The report contains proposals for disclosing not just how climate change might influence the performance of a company, but also the impact of the company itself on climate change.

It contains recommendations that will allow the EC to update its non-binding guidelines on non-financial reporting with specific reference to climate-related information, in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), established by the Financial Stability Board.

The guidance in the report aims to assist companies in developing climate related disclosures that comply with the Non-Financial Reporting Directive and take into account the recommendations of the TCFD.

The report distinguishes between three types of disclosure:

  • Type 1 disclosures – those that companies should disclose (high expectation that all reporting companies disclose them)
  • Type 2 disclosures – those that companies should consider disclosing (expected of companies with significant exposure to climate-related risks and opportunities)
  • Type 3 disclosures – those that companies may consider disclosing (additional or innovative disclosures that provide more enhanced information)

The report said: ‘Companies that report climate-related information can directly benefit from providing quality disclosure to their stakeholders.

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‘The disclosure process can lead to increased awareness and understanding of climate related risks and opportunities within the company, better risk management, and more informed strategic planning.

‘Good climate-related disclosure that reflects strong governance and strategy on issues related to climate change can contribute to securing a lower cost of capital and a more diverse investor base.’

It continued: ‘In addition, increased confidence in climate-related disclosures can bolster green financial products and foster innovation in sustainable investment strategies in the broader financial eco-system.’

Stakeholders can provide written comments on the report until 1 February 2019.