BCS Consulting: Global Progress Report for the Banking Sector

BCS Consulting has produced the first comprehensive analysis of the implementation of the reporting framework outlined by the voluntary Task Force on Climate-related Financial Disclosures (TCFD) in the banking sector.

Evidence on the effects and risks of climate change is growing and more immediate action needs to be taken by individuals, businesses and governments to address the issues.

Mardi McBrien, Managing Director, Climate Disclosure Standards Board (CDSB) says, “Banks have a critical role to play as facilitators of informed and robust capital allocations to support climate-resilient financial systems. The report reiterates the need for greater adoption of the TCFD recommendations globally to meet the scale of the challenge”.

The Task Force on Climate-related Financial Disclosures (TCFD) was established by the Financial Stability Board (FSB) following a request from the G20 for the FSB to consider the financial stability risks associated with climate change. More than two years have passed since TCFD released its final recommendations report setting out the framework to provide more standardisation on the disclosure of costs, opportunities and risks of climate change for organisations across the world.

Jo Paisley, Co-President of Global Association of Risk Professionals (GARP) Risk Institute said, “Climate risk management is firmly on the agenda of regulators and is now front-and-centre for banks to address. This report provides a timely reminder of the work that still needs to be done to meet the ambition of the TCFD framework.”

With a foreword by Sir Roger Gifford, Chair, UK Green Finance Institute, the report by BCS Consulting is the first detailed assessment of the progress by the global banking sector in implementing the TCFD recommendations across the four components of the framework: governance, strategy, risk management, metrics and targets.

For this report, BCS Consulting Sustainable Finance team have

  • analysed the size and geographical distribution of the banks that have endorsed the TCFD framework as of July 1st, 2019,
  • reviewed against a maturity framework the external disclosures of those that have started disclosing on the TFCD framework
  • identified key areas of focus and best practices

Key report findings include:

  1. Of the 76 banks that endorse the TCFD framework only 39 started disclosing
  2. Europe is leading TCFD framework implementation, US and Asia-Pacific are significantly lagging behind
  3. Momentum of new banks endorsing TCFD has slowed significantly since launch in 2017 – only 9 banks have endorsed in 2019 compared to 38 banks in 2017
  4. The most advanced area of disclosure is banks’ own environmental operational footprint, whereas carbon impact of services banks provide is the least mature

Commenting on the report, Hector Fontaine, BCS Consulting Sustainable Finance Lead said: “The results highlight the importance of government action to drive enhanced climate-related financial disclosures in the sector; the countries with the most advanced disclosures and the countries with the highest TCFD engagement, tend to be those where there is clear evidence of an active national climate agenda.”

The report concludes that by carrying out detailed reviews of their current business processes, defining measurable and reliable metrics and targets, and by enforcing a culture of responsibility, banks can play an important role in driving the transition to a lower carbon economy. However, institutions need to act sooner rather than later to facilitate the transformation.

The full report can be downloaded at bcsconsulting.com