London, 13 February 2017 – The World Federation of Exchanges ("WFE"), which represents more than 200 market infrastructure providers including exchanges and CCPs, has submitted its response to the Financial Stability Board (FSB) Task Force ("Task Force") on Climate-related Financial Disclosures Report Consultation.
The Task Force published a set of disclosure recommendations ("Recommendations") for public consultation in mid-December 2016 - designed to enhance the availability of relevant climate information - and requested responses back by 12 February 2017.
The WFE response, prepared with input from members of the WFE Sustainability Working Group (SWG), commends the Task Force for its work, noting the Recommendations should contribute positively to achieving greater certainty about what climate-related information preparers of financial information (companies themselves) should disclose.
In the interests of enhancing the quality and availability of climate-related disclosure, the WFE made four overarching suggestions on the Recommendations:
Place climate-related disclosures within the context of broader ESG disclosure
The WFE believes the Task Force should place the Recommendations within the context of the existing ESG disclosure framework, thereby acknowledging that climate change information forms a portion of the investor-relevant information that companies are encouraged to disclose.
Allow for a phased approach to implementation of the Recommendations
The WFE believes the Task Force should position the full Recommendations as the desired end state, but should also identify interim steps to achieving this, from essential disclosures to more sophisticated tools such as scenario planning.Taking a more granular and phased approach would increase the likelihood of adoption of the Recommendations, and obtaining more decision-useful disclosure from the outset.
Make the case more clearly to the preparers of disclosure information
The Recommendations could be improved if they made a more compelling case for the preparers of the disclosure, to convince companies of the benefit of investing in understanding climate-related risks and opportunities.
Articulate the scope of the Recommendations, and the cost-benefit challenge, more clearly
Simply requiring companies to disclose more information without assessing the overall disclosure burden not only reduces the likelihood that companies will disclose, but may undermine the relative attractiveness of public markets, resulting in a reduction in corporate transparency. To that end, the WFE recommended the Task Force considers what information is absolutely required to achieve the stated objectives.
Nandini Sukumar, CEO, WFE said: "WFE member exchanges note the FSB's identification of climate change as a source of potential financial systemic risk, and support efforts to proactively address this.We caution, however, against imposing an overly onerous disclosure burden, particularly on listed companies."
Siobhan Cleary, Head of Research & Public Policy, WFE said: "WFE members are deeply supportive of initiatives that increase the long-term health of markets. Our comments are therefore aimed at getting to high-quality, decision-useful disclosure across all ESG dimensions."
Click here to read the full response.