As banks prepare to comply with comprehensive climate-related disclosure requirements around the world, KPMG analyzed their challenges and progress. Public interest entities in Switzerland face mandatory climate-related reporting duties when the Climate Ordinance enters into force on 1 January 2024.
The Paris Agreement requires countries to develop long-term climate strategies with a time horizon up to 2050. The international community has responded with individual affirmations to the UN Climate Change Secretariat. Switzerland’s long-term climate strategy includes a pledge to reach net zero emissions by 2050, including partial counting of Swiss-related foreign emissions.
Stakeholders agree that more transparency on the climate impact of business activities is required to meet the targets. Switzerland joins many other countries in introducing new rules on non-financial reporting requirements over the course of 2022.
Climate disclosures in Switzerland
The Swiss Federal Council signed up to the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) proposing mandatory climate disclosure rules. The provisions are implemented through the Ordinance on Climate Disclosures (Climate Ordinance), which applies to large public interest entities and enters into force on 1 January 2024 (i.e. the first disclosures will be required on the 2024 business year, to be published in 2025).
Under Swiss law, climate disclosures will have to be published in the report on non-financial matters (Articles 964a-c of the Swiss Code of Obligations). However, it’s important to note that any climate matters that are financially material need to be captured in the financial reporting. Given the significance of climate change in terms of risk – but also opportunities – for financial institutions, they should all be considering where and to what extent their exposure should be reported. Indeed, in phase 1 of this year’s benchmarking analysis we only looked at banks’ climate-related disclosures in their annual reports.
As Switzerland’s sustainability disclosure requirements draw near, it is interesting to look at what’s happening in the international community. The first two IFRS® Sustainability Disclosure Standards are expected to come out in June 2023, while the EU and the US are developing their own specific standards. Against this background, sustainability reporting including climate-related disclosures is high on the agenda for all banks.
In KPMG’s Phase 1 report of the benchmarking analysis on how banks reported on climate-related matters in 2022, we took a look at the climate-related disclosures in 2022 annual reports made by 35 major banks around the world. In the following, we share some highlights from the analysis.
Location, timing and connectivity
The location and timing of climate-related disclosures make it challenging to understand the big picture: details are often provided in multiple documents, in different sections of reports and published on different dates.
Banks also generally provide separate disclosures for each of the four TCFD pillars – governance, strategy, risk management, and metrics and targets – in their annual reports. However, it is less clear how the four pillars interact.