Corporate ESG-related disclosures – Supporting factors and barriers for implementing the TCFD's recommendationsLisa Krombholz

11 September 2020

Physical and transitional risks from climate change will have a significant impact on the resilience of businesses and financial market stability. Consequently, investors, banks, insurers, and other stakeholders are interested in the financial effects of climate risks and opportunities. To enable more informed decisions to be made on financing and investment matters climate-related disclosure is demanded. This was reinforced by the publication of the Task Force on Climate-related Financial Disclosures (TCFD)'s recommendations in 2017 which aim for consistent and comparable reporting on climate issues.

The goal of this thesis is to answer two research questions: 1) What is the status quo of the implementation of the TCFD's recommendations? 2) What are the barriers that currently prevent companies from implementation and what are supporting factors? To answer the research questions empirical data is collected through secondary sources and expert interviews. The data is evaluated by a systematic document analysis and a qualitative content analysis.

The results show that the implementation of the TCFD's recommendations is still at an early stage of dissemination. The pluralism of environmental, social, and governance (ESG) frameworks distracts and confuses companies. Some companies are neither able nor willing to disclose climate-related information while established business processes impede implementation in practice. In terms of practical feasibility, companies face limited resources and business complexities. Climate disclosures are based on uncertain future developments which deter companies from making definite statements. The implementation can be facilitated by the alignment of different ESG frameworks. Companies need expanded guidance on TCFD implementation which goes beyond high-level advice. Increased pressure from influential stakeholders can accelerate TCFD implementation. Internal alignment lays an important foundation as it ensures that management and employees share the same understanding and have strategies and processes in place that incorporate climate aspects. Finally, cross-company collaboration enables to pool resources to progress collectively toward comprehensive and comparable TCFD reporting.