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Are your climate disclosures meeting investor expectations?

April 1, 2024

Regulators, investors, and shareholders are paying closer attention to financial disclosures for clues on how companies are managing climate risks. A company’s disclosure on climate risk, a top market and economic risk according to the World Economic Forum for years in a row, will impact their budget allocations, asset valuations, and ability to attract investment. 

Investors’ interest in climate risks is now on par with cyber risk, according to a 2023 PWC Global Investors survey. This means investors are looking for clear, transparent, comparable, decision-useful disclosures that provide enough detail to back the credibility of companies’ risk management claims. Publishing disclosures that don’t meet investor needs can cause shareholder and investor loss of trust, issues accessing capital, and reputation damage. 

Recent regulatory and voluntary climate disclosure frameworks have put out prescriptive guidance to help companies meet these investor expectations. These detailed requirements serve as a benchmark for what investors consider ‘good’ disclosures. In fact, 57% of investors say companies meeting the upcoming regulations and standards like the CSRD, SEC, and ISSB S2 will also meet their information needs for decision-making to a “large” or “very large extent” (2023 PWC Global Investors Survey).

That said, companies are struggling to ramp up efforts to produce detailed disclosures and align against multiple frameworks. 

Technology can help teams craft great climate disclosures

Streamlining detailed disclosure requirements across international and national frameworks involves managing over 1000 data points, a significant task for climate teams with limited resources. Fortunately, technology offers a solution by automating manual research and analysis. At Manifest Climate, our AI-powered platform simplifies this process for clients, highlighting commonalities across frameworks and facilitating responses to investors’ inquiries about climate risk.

Utilizing our proprietary methodology, we’ve identified key areas most frameworks focus on regarding climate risk:

  • Identification of material physical and transitional climate risks, along with their materialization timeline
  • Comparison between actual and potential risks, encompassing both historical and forward-looking perspectives
  • Assessment of risks’ impacts on a company’s business strategy, finances, and operations
  • Evaluation of existing risk identification, assessment, and mitigation procedures and tools
  • Examination of leadership’s awareness of climate risks and their involvement in risk management

By pinpointing these shared data points, Manifest Climate equips climate teams with a foundation to evaluate their climate disclosures and adopt a strategic approach towards regulatory compliance.

Achieve multi-framework alignment with unbiased actions items

Manifest Climate offers a unique feature called the “multi-standard view,” allowing users to visualize how recommended disclosure action items align with various disclosure frameworks. This view enables clients to prioritize action items that satisfy one or multiple selected standards. By leveraging this feature, organizations can work towards aligning with multiple standards simultaneously, streamlining compliance efforts, fostering internal climate competency, and facilitating the reporting of foundational action items.

Once companies have put basic processes and procedures in place, they can turn their attention to gathering and providing information for the more detailed requirements, which can vary across different frameworks. For example, CSRD’s ESRS E1 and the SEC’s final climate disclosure rule have very different risk management disclosure requirements. The table below outlines these differences:

InformationCSRD (ESRS-E1)SEC
What counts as a material riskDouble materiality, i.e. how climate risk materially impacts the company and the company’s material risks to the environmentSingle materiality, climate risk materially impacts the company’s financial performance and position.
Identification and assessment of climate risksDescription of identification and assessment processes, which shall involve:
• Assessment of GHG emissions and their impacts• Identification of physical and transition risks across all operations and value chains• Consideration of high emission scenarios and 1.5 warming scenarios in identifying material physical and transition risks respectively 
Description of identification and assessment processes, which may involve:
• Assessing the relative significance of climate-related risks compared to other risks• Consideration of existing or likely regulatory requirements or policies when identifying climate-related risks• Consideration of shifts in customer or counterparty preferences, technological changes, or changes in market prices in assessing potential transition risks• How the company determines the materiality of climate-related risks. 
Climate managementOn managing risk, companies shall disclose:•  Policies adopted to manage its material impacts, risks and opportunities related to climate change mitigation and adaptation• Climate change mitigation and adaptation actions andthe resources allocated for their implementationOn managing any material risks, companies must describe: • Integration of climate risk identification, assessment, and management processes into the overall risk management system or processes• Transition plans to manage material transition risks that are part of the company’s risk management strategy

Compare disclosures to detailed framework requirements

Manifest Climate provides offers a comprehensive Disclosure Index where clients can review detailed requirements for each framework mapped to recommended action items and disclosure references. By clicking on the hyperlinks under the Section column, clients can view original disclosure requirement language and additional guidance pertinent to that section and action item, facilitating a deeper understanding and ensuring adherence to the specified standards. This functionality empowers users to navigate through disclosure requirements with precision and confidence, ensuring clarity and compliance in their reporting processes.

Close your disclosure gaps with Manifest Climate

Manifest Climate is an AI-powered platform that helps companies close disclosure gaps and supercharge their climate strategies. Our platform is the world’s best at assessing climate disclosures. We help to highlight your climate disclosure and management gaps across multiple standards and frameworks and provide data-driven recommendations for improvement. Our technology also helps your team reduce time spent on manual research by +75%.