Full Disclosure 5

The role that the board and/or management play in overseeing, assessing and managing climate-related risk is important to determine whether adequate attention is being given to the issues.

The TCFD recommends that organisations disclose:

1. The board’s oversight of climate-related risks and opportunities.
2. management’s role in assessing and managing climate-related risks and opportunities.

Possible answers:

Board = Disclosure explicitly mentions that the board is responsible for overseeing climate risk. Board responsibility for “sustainability”, “environmental issues”, or “ESG” is not sufficient.

Non-board executive(s) = Climate-related issues are managed by management-level appointees or committees.

Not disclosed = Responsibility is not clearly disclosed.

The TCFD recommends that the key metrics used to measure and manage climate-related risks are disclosed and, where climate-related issues are material, whether and how these performance metrics are incorporated into remuneration policies is described.

Remuneration policies should be designed to incentivise long-term corporate behaviours.

Climate-related performance metrics might include energy or emission reduction targets. These targets and metrics are usually provided in the Annual or Integrated Report, but CDP disclosures also provide additional information.

Possible answers:

Yes = Remuneration policy includes climate-related performance metrics.

No = Remuneration policy does not include climate-related performance metrics.

Unclear

The TCFD recommendations call for the disclosure of “the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material.”

Possible answers:

Yes = Climate risks are explicitly mentioned as a material or principal risk in the annual or integrated report.

No = Climate risks are not explicitly mentioned as a material or principal risk in the annual or integrated report.

Unclear

The TCFD recommends that an organisation describe the climate-related risks and opportunities that it has identified over the short, medium and long term and the impact that they will have on businesses, strategy and financial planning.

Possible answers:

Mainstream reports = Detailed disclosure, including timeframes and impacts, with timeframes in mainstream annual reporting

Limited = Detailed disclosure in CDP with some disclosure in mainstream reports, but limited detail on timeframes and/or impacts provided.

CDP only = Detailed disclosure, including timeframes and impacts, with timeframes in CDP only

No = no disclosure

The TCFD recommends organisations describe how resilient their strategies are to climate change and that they consider disclosing how their strategies might change to address climate-related risks and opportunities.

Possible answers:

Yes = disclosure of how climate risks and opportunities are incorporated into strategy through efforts such as mitigation, adaptation, resource efficiency, pollution reduction and transition plans.

Limited = some disclosure of how climate risks and/or opportunities are incorporated into strategy, but with insufficient detail.

No = no disclosure of how climate risks and opportunities are incorporated into strategy.

Unclear

The TCFD recommends that organisations describe “how resilient how resilient their strategies are to climate-related risks and opportunities, taking into consideration a transition to a lower-carbon economy consistent with a 2°C or lower scenario and, where relevant to the organization, scenarios consistent with increased physical climate-related risks.”

Possible answers:

Yes = disclosure of scenario analysis describes the range of scenarios used (including a 2°C or lower scenario), critical inputs and assumptions, timeframes, and potential implications.

Partial = disclosure of scenario analysis describes the range of scenarios used (including a 2°C or lower scenario), but does not adequately address areas such as critical inputs and assumptions, timeframes, and potential implications.

Limited = disclosure of scenario analysis indicates that scenarios are used, but only limited descriptions are provided.

No = none of the above.

The TCFD Supplemental Guidance for Banks recommends that banks should describe significant concentrations of credit exposure to carbon-related assets and the amount and percentage of carbon-related assets relative to total assets.

Possible answers:

Yes = significant concentrations of credit exposure to carbon-related assets and/or the amount and percentage of carbon-related assets relative to total assets are disclosed.

No = no disclosure

The TCFD Supplemental Guidance for Banks recommends that banks should consider disclosing their climate-related risks (transition and physical) in their lending and other financial intermediary business activities.

Possible answers:

Yes = climate-related risks (transition and physical) in their lending and other financial intermediary business activities are disclosed.

No = climate-related risks (transition and physical) in their lending and other financial intermediary business activities are not disclosed.

The TCFD’s recommended disclosure is for the organisation’s processes for managing climate-related risks to be described, including how decisions to mitigate, transfer, accept or control these risks are made.

Possible answers:

Yes = Climate-related risks form part of company-wide risk management programme or specific climate-related risk management process.

No = No evidence that climate-related risks form part of company-wide risk management programme or specific climate-related risk management process.

Unclear

Under the TCFD recommendations, companies should disclose their key climate-related targets such as those relating to GHG emissions, water usage and energy usage. GHG emission reduction targets can be absolute or intensity-based. Absolute targets are stronger as, under an intensity target, emissions can increase as along as emission intensity decreases.

Possible answers:

Absolute = The company has set an absolute emission reduction target.

Absolute and intensity = The company has set an absolute emission reduction target and an emission intensity reduction target.

Intensity = The company has set an emission intensity reduction target.

Unclear = The company states there is a target, but it is not clear.

No = There is no GHG emission reduction target currently in place.

The TCFD indicates that organisations should consider including the timeframes over which the target applied. Long-term targets are considered to be those over five years.

Possible answers:

Science-based = a target recognised by the Science Based Targets Initiative beyond 5 years has been set.

Yes = There is an absolute or intensity reduction target over five years in duration.

No = There is not an absolute or intensity reduction target over five years in duration.

Companies are assessed on whether they report:

Scope 1 — Direct emissions from owned or controlled sources;

Scope 2 — Indirect emissions from generation of purchased energy;

Scope 3 — Indirect emissions in the value chain of the reporting company such as those from business activities such as purchased goods and services, business travel; use of sold products; transportation and distribution.

The TCFD Recommendations stipulate the disclosure of Scope 1, Scope 2 and, if applicable, Scope 3 GHG emissions, while it is suggested that historical data and “generally accepted industry-specific GHG efficiency ratios” are provided.¹

Possible answers:

Scope 1, 2 and 3 = Companies report on their Scope 1, 2 and 3 emissions for the current year and at least the previous year.

Scope 1 and 2 = Companies report on their Scope 1 and 2 emissions for the current year and at least the previous year.

Scope 1 = Companies report only on their Scope 1 emissions for the current year and at least the previous year.

No = Companies do not report on their emissions.

The TCFD calls on organisations to provide their internal carbon price where relevant. A price on carbon is considered to be one of the best ways to cut carbon emissions and meet the Paris’ agreements target of holding global average temperature increases to 2°C.

Possible answers:

Yes = internal carbon price is disclosed

No = no internal carbon price is disclosed

The Carbon Tax, which was introduced in June 2019, imposes a tax on GHG emissions at the base tax rate of R120 per tonne of CO2e. The rate will increase at CPI+2% until 31 December 2022 and at CPI after this date.

Possible answers:

Full = liability is disclosed with additional information on whether the rate being used is R120/tonne of CO2 or is the rate after various allowable deductions.

Partial = liability is disclosed without additional information.

CDP only = liability is only disclosed in CDP submissions.

No = no liability is disclosed

The Carbon Tax Act provided for various allowances up to a maximum total percentage. Participation in the DEA’s voluntary carbon budget programme provides for a 5% allowance.

Possible answers:

Yes = participation is disclosed in mainstream reports.

CDP only = participation is only disclosed in CDP submissions.

No = not disclosed.

The Institute for Energy Economics and Financial Analysis has reported that over 100 major global financial institutions have introduced policies restricting coal funding.²

Possible answers:

Yes = a publicly-available policy addresses funding of coal mining and coal-fired power

Partial = a publicly-available policy addresses either funding of coal mining or coal-fired power

No = no disclosure or policy not publicly-available