One of the key recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) focuses on the need for investors to perform scenario analysis, to understand the risks of different climate-related scenarios on their business. However, this recommendation is not being applied consistently, notably by companies in the energy and transportation sectors.
To raise the consistent implementation of this recommendation, 2°ii launched the Company Reports project in 2019. The project targets companies in the utility and automotive sectors that form part of the Climate Action 100+ (CA100+) target group, an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.
2°ii will provide these companies’ climate scenario analysis results to shareholders willing to engage on this topic. This approach will investors to:
- Spark the interest of investee companies in scenario analysis, by providing company-specific results and benchmarking them against their peers;
- Show that scenario analysis can be performed today, and thus request disclosure of scenario analysis results without delay;
- Start the conversation/negotiation on transition plans and climate target setting, without having to wait for significant progress on disclosure.
Operationally, 2°ii will produce “company profiles” that provide a quantitative analysis of the alignment of the company’s assets and investment/production plans with a range of climate scenarios. The company profiles will be provided to partner investor coalitions (UN Principles for Responsible Investment, Institutional Investors Group on Climate Change, CERES, etc.), and integrated into the PACTA portfolio analysis tool.
We will complement this work by engaging with policymakers, standard-setters and financial supervisors about climate-related metrics, benchmarks, and regulations related to disclosure on scenario analysis. Our overarching objective will be to ensure consistency between the practices pioneered with investors and the emerging regulatory framework on the topic, notably in Europe.