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Can we align to drive change? Climate change disclosure in G20 countries

This OECD-CDSB report on "Climate change disclosure in G20 countries: Stocktaking of corporate reporting schemes" covers mandatory legislation by most G20 countries requiring the disclosure of climate change related information, policies and related risks.

Back in 2005 scientific consensus was internationally reached about climate change being a reality. It was a matter of when rather than if but, unfortunately, the conversation somehow stalled and did accelerate the uptake of climate mitigation and adaptation strategies across public and private sectors. 

A decade later, after some questionably successful climate conferences, following the UN negotiations at COP21 last December – and for the first time in human history – a global agreement has been signed enshrining in international law the need to limit global temperature rise. The race is ‘on’ to keep the climate safe and, with it, to ensure the very stability of social and economic systems.

Around the world, however, many governments have had to face up to rising challenges. Increasing climate-related impacts, including damages to urban infrastructure and water services, have significantly inflated their costs and have put in place distinct measures within development control plans and/or other legislative provisions to ensure a degree of due care, what some call ‘climate resilience’.

Each government has a leading role to play in all this. The increasing realisation that climate change is a material risk to companies, business and society at large has manifested in the increasing introduction of mandatory corporate reporting schemes across the world.

Mandatory reporting legislation induces us to reflect about the importance to concertedly shift the global economy by means of contextualising corporate business models and practices within the framework of a carbon-constrained world (or low-carbon transition). Reliable, science-based and transparent climate-related information is crucial to both regulators and the users of financial information as it demonstrates existing levels of stewardship and highlights areas in need of attention. Most importantly, it allows the integration of climate information into core decision-making processes, with overall capital markets benefits: the former affects the optimal allocation of capital by ensuring business valuation takes stock of a broader set of risks and corporate performance measures. To do this, it is key that governments engage with the private sector to successfully design, finance and implement measures to address climate change whilst meeting sustainable development goals.

The analysis of our report on mandatory reporting schemes in G20 countries shows that there are commonalities but also significant divergences between reporting requirements, the scope and quality of the reported information, and the measures used by governments to enforce the schemes. Whilst there is no universally agreed definition of ‘corporate climate change-related information, there is already significant agreement on what characterizes climate-related content. The latter has been defined by organizations such as the Carbon Tracker Initiative, CDP, the World Resources Institute, the Sustainability Accounting Standards Board, CDSB and others. There is scope, and definitely a need, for the harmonisation of climate change-related reporting and we believe that there is a huge opportunity to use similar infrastructure to financial reporting architecture in order  to achieve overall reporting integrity and coherence. As our Founding Director, Lois Guthrie recently said in light of the WEF meeting in Davos: “If climate change is a mainstream risk to financial stability, then it should be reported through mainstream filings just like equivalent risks. … Decision-makers and standard setters need to take a good look at the way in which climate, financial, governance and management disclosures work together to support effective decision-making.”

This OECD-CDSB report is part of a project to align policies for the transition to a low-carbon economy, conducted jointly by the OECD, the International Energy Agency, the International Transport Forum and the Nuclear Energy Agency, and also builds on work undertaken in the context of the chapter on Disclosure of the OECD Guidelines for Multinational Enterprises.

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