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Silvie Koppes and Dimi Kumarasinghe | 8 June 2023


Sustainability reporting, including climate-related disclosures, is rapidly evolving and becoming more formalised. The first two IFRS® Sustainability Disclosure Standards will soon be issued for implementation in the FY24 reporting cycle, and there are also major developments in jurisdictions like the EU and US.

Our analysis of banks’ climate-related disclosures shows that many banks have significant work to do to get ready for the new sustainability reporting requirements.

In the first phase of our benchmarking analysis, we assessed the climate-related disclosures made by 35 global banks as part of their 2022 annual reports1. In this second phase, we expand our analysis to focus on how these banks’ climate-related disclosures align with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The second phase also looks at other standalone reports, such as climate and sustainability reports, which is where most banks provide their TCFD-aligned disclosures.

Three key findings emerged from our analysis.

  • Banks have laid the foundation for their climate-related strategy –  now they should be building their detailed transition plans with clear actions and interim targets.
  • More transparency is needed to help users understand financed emissions – this includes clarity on methodologies, assumptions, data and limitations involved in the calculation.
  • Banks have significant ground to cover to meet new sustainability reporting requirements.

The strategic foundations are laid – what’s next?

Many banks have an overarching commitment to achieve net zero by 2050, including in their financed and facilitated emissions. They disclose the focus areas of their climate-related strategy, which often relate to providing sustainable or green financing, supporting customers in their transition, and reducing emissions across both their own operations and their financed and facilitated emissions.

The next step for banks is to give users details of how they plan to execute their strategy to achieve a low-carbon economy – referred to as transition plans – and of their climate-related metrics and targets for tracking their progress.

The TCFD guidance focuses on transition plans. These plans are also an important aspect of the new ISSB Standards, and a key focus area for regulators and governments in some jurisdictions – e.g. in the UK.

A few banks have developed and disclosed details of their initial transition plans in 2022. However, many are yet to disclose detailed transition plans with concrete short-, medium- and long-term actions to achieve their intended progress towards their overall net-zero commitment by 2050. Many banks have also not yet clearly set out their interim targets. This makes it challenging for users of disclosures to assess banks’ effort, feasibility and progress towards their overall net-zero objective, as well as whether they have identified appropriate strategic focus areas that can help support them to achieve their goals.

Another area where banks need to push ahead relates to scenario analysis. While most banks currently use scenario analysis to assess risk, it’s not yet clear how they are using it to evaluate the resilience of their climate-related strategy and inform their strategic planning. Also, disclosures on scenario analysis are not comprehensive at this stage, as they often cover only a portion of lending exposures and are subject to data limitations.

Silvie Koppes

Silvie Koppes

KPMG in The Netherlands


Dimi Kumarasinghe

Dimi Kumarasinghe

KPMG International Standards Group


Are disclosures on emissions sufficiently transparent?

For banks, financed and facilitated emissions are one of the most important metrics for assessing progress on their climate-related targets. However, many banks note the challenges in calculating these emissions. Banks currently calculate and disclose financed emissions for a portion of their total lending exposures, based on data that often relates to earlier periods and methodologies that are still evolving.

This brings us to data, which continues to be a significant challenge. To calculate emissions, banks need data from their customers, which is often limited in availability, variable in quality and collected with a time lag. Until customers have calculated their own greenhouse gas emissions, and such data is readily available to banks and subject to assurance, it remains challenging for banks to calculate high-quality total financed and facilitated emissions. This means that disclosed emissions, often based on data from one or two years ago, may continue to be subject to significant estimation uncertainty.

The Partnership for Carbon Accounting Financials is currently the most commonly referenced methodology. However, at present there is no established, universally accepted methodology to help banks quantify these emissions. Even if banks measure and report these emissions, the absence of such a methodology makes it challenging for users to compare numbers between banks.

What would help users better understand current financed and facilitated emissions disclosures?

More clarity on the methodology, assumptions, data and limitations involved in making these disclosures would help.

Additionally, for greater transparency over the actual progress and comparing over time and between banks, further quantitative and explanatory qualitative information about financed and facilitated emissions is needed. Here, users would benefit from understanding year-on-year changes to emissions numbers, including to what extent these are caused by restatements or methodology changes, or due to other drivers, such as volume changes and emissions reduction efforts.

We also note that some banks started reporting restatements of previously disclosed emissions – e.g. due to improved data. More clarity over restatements, including explanations for them, would help users understand the nature of the restatements and emissions disclosures.

There’s significant ground to cover

Banks have significant ground to cover to meet new sustainability reporting requirements. So where do we see the biggest gaps based on the 2022 disclosures?

Banks should seek to improve the location, timing and connectivity of climate-related disclosures to allow users to understand the big picture, similar to the findings in our Phase 1 analysis. Also, the focus on connectivity between climate-related disclosures in and outside the financial statements will become more prominent – for example, the International Accounting Standards Board recently started its project on climate-related risks in the financial statements and the European Financial Reporting Advisory Group will embark on a research project on the connectivity between financial and sustainability reporting.

The TCFD framework is a common input to many of the new sustainability requirements, including the ISSB Standards. Our analysis shows that banks’ climate-related disclosures in the governance and risk management pillars of the TCFD framework are relatively advanced – but should be developed further to meet the new ISSB Standards. This includes making disclosures on the skills and competencies of their boards, and about the controls and procedures applied to management of climate-related risks and opportunities.

On the strategy, and metrics and targets pillars, our analysis shows that many banks still need to do significant work on the TCFD-recommended disclosures, particularly on scenario analysis, transition plans, and financed and facilitated emissions. The new ISSB Standards will introduce additional detailed disclosures for these two pillars, such as assessing how climate-related risks translate into impacts on banks’ financial performance and position in the short, medium and long term.

Overall, to meet the new reporting requirements, banks should have sufficiently rigorous processes and controls to generate timely, high-quality disclosures and achieve connectivity. This is likely to involve many departments above and beyond financial and sustainability reporting. In addition, banks operating in multiple jurisdictions may be subject to several disclosure frameworks and have various requirements to comply with. Finally, let’s not forget that the new requirements will require both climate-related disclosures and other sustainability-related information to be reported at the same time, and for the same period, as the annual financial statements.

Banks will need to step up to meet the new sustainability reporting requirements. They should not underestimate the time and effort required to effectively implement the new requirements – and should plan to get ready now.

Find out more

Read our benchmarking analysis on how banks reported on climate-related matters in the 2022 reporting season. The reports include the scope and approach of our analysis. See Phase 1 for our detailed findings based on disclosures forming part of the banks’ 2022 annual reports, and Phase 2 for our benchmarking against the TCFD recommendations.

1 For Phase 1 of our benchmarking analysis, in determining ‘at the same time’, we reviewed the 2022 other standalone reports where these were released no later than one week after the release of the 2022 financial statements.

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