Investors are demanding ever more comprehensive disclosures on the impact of climate-related matters. They’re expecting a company’s financial statements, management discussion and analysis (MD&A) and sustainability-related disclosures to provide a coherent, connected and integrated picture of the risks and opportunities facing the business.
We’ve analysed the 2023 annual reports of 35 major banks around the world, looking at the nature and extent of their climate-related disclosures. This report contains our key observations from this benchmarking analysis.
Banks included and areas covered
Our report covers 35 major banks including in the US, UK, Europe, Australia, Canada, China and India.
Our analysis focuses on five selected areas which are current or emerging areas of focus within the banking industry.
Progress continues but the opportunity for banks to tell a connected story remains. Banks are responding to the demands for greater disclosure of climate-related information with an increasing volume being reported. They are now on a journey to connect the pieces together and create a narrative that is more meaningful and clear for their users.
Connected reporting
Financial reporting
Climate-related disclosures remain limited in the financial statements with credit risk being the main area of focus. Connecting the increased volume of information disclosed across the reporting suite to the financial statements is key.
Assurance
Assurance is most often obtained over operational emissions. For banks disclosing financed and facilitated emissions, there is a growing trend for obtaining assurance over this information. Assurance obtained is mostly limited assurance, although a few have started to obtain reasonable assurance – mainly over certain operational emissions
Financed and facilitated emissions
Calculating financed and facilitated emissions is far from easy and is an ongoing exercise for banks, particularly as they navigate data challenges. Most banks use the Partnership for Carbon Accounting Financials (PCAF) methodology for calculating emissions, but there are divergences in application. This makes it difficult to compare across banks.
Transition plans
Many banks have committed to becoming net zero including financed emissions, by 2050. Now they need to continue developing their transition plans with detailed implementation strategies that include clear actions. This would allow users to better assess the feasibility, progress and effort associated with reaching net zero.
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