December 12, 2022– IFC (a member of the World Bank Group) and CDP (a not for profit which runs a global environmental disclosure system) released a report analyzing the current state of best practices in environmental disclosure, examining more than 100 disclosure practices across developed and developing economies. The report, which was developed in consultation with the United Nations Sustainable Stock Exchanges (UN SSE) initiative, also highlights practical examples for developing high-quality regulation that addresses market needs and investor demands, helping to mobilize private capital flows towards sustainable solutions.
Voluntary disclosure of environmental action has accelerated rapidly as companies seek to attract sustainable investment opportunities and reduce their environmental impacts. In 2022, nearly 20,000 organizations disclosed sustainability-related information through CDP – a 38% increase from 2021. Additionally, 67 stock exchange members of UN SSE have written guidance on environmental, social and corporate governance reporting. Of these 33 markets are also subject to mandatory ESG disclosure rules.
"The growth in voluntary disclosure in recent years is overwhelmingly positive. Yet, in the face of the climate and environmental crises, we recognise that voluntary disclosure is no longer enough," said Pietro Bertazzi, Global Director for Policy Engagement and External Affairs at CDP. "This report will be vital in ensuring that governments develop policies that can truly drive forward the environmental agenda, track their own progress towards targets and boost ambitious action in the real economy. Robust and ambitious mandatory disclosure regulation will help all actors to better understand and act on not just the risks facing them, but the opportunities in front of them as well as their impacts on people and planet."
The report examines environmental policies and practices against five criteria set out by CDP on mandatory disclosure requirements, including: addressing sustainability-related financial disclosures, as well as impact on people and the planet; ensuring compatibility of disclosure standards either required or recommended; providing a system of enforcement; adhering to technical quality and content; and allowing space for innovation. The assessments covered in the report also consider IFC's comprehensive approach to addressing the corporate governance and regulatory environment, including codes, scorecards and reporting guidelines.
"Sustainability and climate reporting is often lacking, particularly in emerging markets where private sector investment is critical to achieving the Sustainable Development Goals and the Paris Agreement," said Martine Valcin, Global Manager, Corporate Governance and ESG Advisory Knowledge and Learning, IFC. "The environmental disclosure policies explored in this report can help regulators and stock exchanges in emerging markets strengthen reporting practices and develop appropriate regulatory tools, paving the way for these economies to accelerate efforts."
The report's findings are a critical resource given the current trajectory towards strengthening environmental disclosure, including the creation of the International Sustainability Standards Board by the International Financial Reporting Standards Foundation and the recent adoption of the European Union's legislative proposal on corporate sustainability reporting.
“Guidance, standards and regulation are necessary but not sufficient to achieve high-quality sustainability reporting around the world. Market education programmes, like those conducted by stock exchanges, are a critical complement to standards and regulation to ensure their successful adoption and implementation,” said Anthony Miller, Coordinator UN SSE.
Over the past year, 55 SSE Partner Exchanges have hosted training for their market specifically on climate-related financial disclosures and the TCFD. The UN SSE, IFC and CDP have facilitated 188 hours of training in collaboration with stock exchanges to help upskill market participants on the growing demand for climate-resilient companies and climate-related disclosures. Building on the UN SSE initiative’s Model Guidance on Climate Disclosures and the TCFD’s recommendations, this interactive training allows companies to ask experts key questions to overcome hurdles and accelerate their climate-disclosure journeys. Through this training, the UN SSE, CDP, IFC and SSE Partner Exchanges have provided 14,868 participants with bespoke and interactive training to support their climate-disclosure journeys. To learn more about this training, see the article Three lessons from 200 hours of TCFD training for 15,000 global participants.
About IFC
IFC — a member of the World Bank Group — is the largest global development institution focused on the private sector in emerging markets. IFC works in more than 100 countries, using its capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2022, IFC committed a record $32.8 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of global compounding crises. For more information, visit www.ifc.org.
About CDP
CDP is a global non-profit that runs the world's environmental disclosure system for companies, cities, states and regions. Founded in 2000 and working with more than 680 financial institutions with over $130 trillion in assets, CDP pioneered using capital markets and corporate procurement to motivate companies to disclose their environmental impacts, and to reduce greenhouse gas emissions, safeguard water resources and protect forests. Nearly 20,000 organizations around the world disclosed data through CDP in 2022, including more than 18,700 companies worth half of global market capitalization, and over 1,100 cities, states and regions. Fully TCFD aligned, CDP holds the largest environmental database in the world, and CDP scores are widely used to drive investment and procurement decisions towards a zero carbon, sustainable and resilient economy. CDP is a founding member of the Science Based Targets initiative, We Mean Business Coalition, The Investor Agenda and the Net Zero Asset Managers initiative. Visit cdp.net or follow us @CDP to find out more.
