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Dissecting a Climate Disclosure Request From Your Investor

Article Overview

The transition to a low carbon economy will create a historic level of investment opportunities and risks for investors and their clients. To that end, corporate climate disclosure requests from investors are on the rise. More investors than ever are requesting detailed and current climate information from the companies they’re investing in to reduce exposure to climate-related risks and maximize climate-related opportunities.

This blog will break down the information you need to know on how to fill out a climate disclosure request from your investor and meet their needs for accurate and current climate information.

Thankfully, most investor climate disclosure requests are ubiquitous with slight differences across sectors and geographies and very much aligned with primary climate disclosure frameworks, e.g., the Taskforce for Climate-Related Financial Disclosure (TCFD), The Greenhouse Gas Protocol (GHGP), and the CDP.

CDP has collected climate-related data for 590+ institutional investors with over $110 trillion in assets under management and 200+ major purchasers with over US$5.5 trillion in procurement spending. CDP collects this data through the Climate Change Questionnaire, which is a fully comprehensive and ever-evolving document aimed at measuring climate impact, setting ambitious targets, and disclosing progress towards climate targets to investors and other stakeholders.

The CDP Climate Change Questionnaire

Most investors’ request questionnaires for climate disclosure are aligned or are exactly the same as the CDP questionnaire. The CDP questionnaire is a series of TCFD-aligned questions that can be generic or sector-specific.

Within the questionnaire, the CDP asks around 25 questions depending on the company's size and sector. The 25 questions are contained within the four main themes of guidance within the TCFD, including Governance, Risks & Opportunities, Strategy, and Targets and Emissions.

These requests from investors through CDP and TCFD questionnaires are also in line with the evolving climate disclosure ecosystem, which now counts the UK, the US, New Zealand, and Japan among the growing number of countries that are implementing TCFD-aligned carbon disclosure mandates.

What’s in an Investor’s Climate Disclosure Request

The extent of your climate disclosure to your investor will depend on several factors such as the size of your company and the sector/s it operates in. But, it will always follow a similar process fleshed out in the TCFD-aligned CDP questionnaire.

The request for data will likely include either the minimum or the full version of the CDP Climate Change Questionnaire. The minimum version is for organizations disclosing for the first time or those with revenues under $250 million. It contains fewer questions than the full version and is not sector-specific. In contrast, the full version contains slightly more questions as well as sector-specific questions.

Each does, however, have the same themes of questions, which include:

  • Governance: Do climate-related issues have board-level oversight? If not, why? Who is responsible? Do you have climate-related incentives for employees?
  • Risks and opportunities: Does your organization have a process for identifying, assessing, and responding to climate-related risks? If not, why? Have you identified financial and strategically material climate-related risks and opportunities? Provide details of these risks and opportunities.
  • Business Strategy: Does your organization’s strategy include a transition plan that aligns with a 1.5°C world? Please describe.
  • Targets and Performance: Do you have an emissions target? Provide details of your absolute emissions and emissions intensity targets and progress toward them. Provide details of methane, net zero, and low carbon energy targets. If no emissions targets, why not?
  • Emissions methodology, data, and breakdown: Provide your base year emissions.  Which standard, protocol, or methodology did you use to collect activity data and calculate emissions? What were your Scope 1 and 2 emissions? Describe your approach to reporting on Scope 1 and 2 emissions. How do your gross global emissions (Scope 1 and 2 combined) for the reporting year compared to those of the previous reporting year? What were your Scope 3 emissions, and what did you exclude?
  • Energy: Describe your energy-related activities and report on overall energy consumption.
  • Engagement: Do you engage with your value-chain on climate-related issues? Do your suppliers have to meet climate-related requirements as part of your organization’s purchasing process?

These are the generic questions all companies will likely get from their investor. However, other questionnaires may include more detailed questions or have sector-specific questions. To better visualize what a completed CDP climate disclosure request looks like, explore completed questionnaires in the public domain from firms like BASF, BP, and Oracle. These questionnaires reveal how detailed an investor-driven climate disclosure must be.

How To Automate Climate Disclosure Requests

Industry organizations such as Forrester and the Center for Climate and Energy Solutions have created guides and best practices to assist enterprises or first-time reporters with the demands of TCFD and CDP disclosure. One of the critical aspects on your climate disclosure journey, according to the Forrester Corporate Climate Change Disclosure Template, is automating the process.

Automation is critical because collecting, managing, and reporting climate-related information manually in spreadsheets can be a costly and timely process. Recent research from ERM estimated the cost of TCFD-aligned corporate climate disclosures can be $533,000 per year. However, these costs can be reduced significantly with the use of a climate management and accounting software platform.

Carbon accounting software enables you to automate this disclosure request process and ensure your investor is getting the most accurate and up-to-date climate information.

Carbon management software, such as Climate Management and Accounting Platforms (CMAP), enables you to kickstart your decarbonization journey, set up your operational boundaries, automatically align with the alphabet soup of carbon accounting and disclosure frameworks such as CDP and TCFD, streamline investor-grade carbon reporting with market-leading partners such as Workiva, and accurately calculate your carbon emissions.

CMAPs also offer climate impact benchmarking to quickly compare where your organization stands against your peers. By leveraging CDP data from other companies, you can assess your performance against others in your sector or geography and ensure you are a more appealing prospect to your investor. To see how a CMAP can automate this process for your organization, schedule a demo with Persefoni; the best software provider for automating carbon accounting and financial disclosures, according to Forrester.

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