On Wednesday 19 May UK Finance hosted the third of our four-part ?COP 26 and Beyond? webinar series in collaboration with EY. This webinar focused on implementation of the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) and related issues. Paul Chisnall, Director, Sustainability was joined by two practitioner panellists, Simon Connell of Standard Chartered and Amy Thomson of Nationwide, as well as three speakers from EY's sustainable finance team, Nate Blackmore, Youri Lie and Khadija Ali.

Nate Blackmore from EY began by introducing the TCFD, in particular its core focus on physical and transition risks, four priority areas and 11 recommendations.

Youri Lie then gave a global exclusive overview of the findings of EY's latest Climate Risk Disclosure Barometer. This annual assessment of over 1000 firms in 42 countries is the world's most comprehensive TCFD benchmarking analysis and looks at both the coverage and the quality of TCFD disclosures. The key findings from the latest report included noting that at the cross-industry level, the UK has jumped from the middle of the pack to the top on both coverage and quality. At the global level the financial services sectors score higher than the non-financial sectors - 62 per cent vs 58 per cent for coverage and 37 per cent vs 28 per cent for quality - while banks scored even higher, with 77 per cent coverage and 46 per cent quality. Within the UK banking sector, the highest score among the four TCFD areas was for governance, with risk management lowest. This of course still remains a work in progress.

Next up was Khadija Ali, who set out EY's top five expectations for the 2021 climate risk reporting period:

1.    More clarity on how net zero targets will be achieved

2.    More clarity on the green products firms offer

3.    Greater detail of scenario analysis, especially the CBES climate stress tests

4.    Enhanced assurances of the skills and training being provided to senior executives and board members on this topic

5.    Increased confidence in the disclosures themselves, through the design of appropriate reporting procedures to avoid greenwashing

The webinar then turned to the practitioner panel for their reflections. Simon Connell noted that the focus at the launch of the TCFD had been on the impact of climate change on firms, but that the focus was now shifting to include the impact of firms? activities and investments on the climate. Simon went on to say that the TCFD had been extremely useful, but he cautioned that there were risks of fragmentation in its application - even in the UK, where there are currently plans for three separate TCFD reporting channels. Simon added that the TCFD would ideally more explicitly invite disclosures to note the opportunities of the transition, which were currently covered under the strategy heading. Simon ended by highlighting the importance of understanding who the target audience was for a TCFD report, as this should guide what is included as well as where and how it is presented.

Amy Thomson began by saying that 2021 had been a big year for Nationwide regarding disclosure with its TCFD report due out in the coming days, and represented a step change compared to 2020. This was thanks to the detailed guidance that had become available such as the TCFD Playbook. Amy explained that the nature of TCFD reporting had to be more open and less precise than other reporting. She added that the guidance from Sarah Breeden that ?perfection is not a limit to progress? was very helpful, as this helped firms be frank about the journey they are on regarding climate risk in their disclosures.

The ensuing Q&A touched on a wide range of topics, including the distinction between ?comply? and ?explain? in Financial Conduct Authority (FCA) disclosures and the communication benefits of reporting under the TCFD's four ?pillars? - governance, strategy, risk management and metrics and targets. Discussion then turned to the extent to which the upcoming UK taxonomy should align with the EU's, noting the benefit of a global framework to ensure taxonomies are interoperable given capital mostly needs to flow from developed markets to emerging markets to reach net zero, and the need for taxonomies to work in support of transition to net zero in addition to defining unambiguously ?green? activity.

The recording can be accessed by registering here and you can register for the fourth webinar in our series, which will be on 23 June and cover the Transition to Net Zero, here.