BlackRock CEO Larry Fink released his annual letter to CEOs this week, asking recipients to tailor their environmental, social and governance (“ESG”) reports to ensure they are “group compliant.” Working on Climate-Related Financial Disclosures” (“TCFD”), a framework that aims to help public companies and other organizations disclose climate-related risks and opportunities. As part of the company’s focus on “sustainability,” Fink says BlackRock “is asking companies to set short, medium, and long-term goals for GHG reductions” and ensure that Corresponding reports are TCFD-compliant, as the company “believes they are essential tools for understanding a business’s ability to adapt in the future.”
Fink’s call for companies to use uniform ESG disclosures to benefit investors “reflects a growing consensus among leading companies (e.g., State Street) and regulators (e.g., the chairman of the Securities and Exchange United States Commission, Gensler) that the disclosure framework set out by the Financial TCFD created by the Stability Board is the appropriate model to adopt,” says Mintz attorney Jacob Hupart. summit of the world’s largest asset management firm, pressure from Fink and other powerful investors for uniform disclosures is expected to impact “regulators’ reasoning and decision on eventual implementation,” as the SEC, which has yet to issue its rules on climate-related disclosures.
Among those who have decided to make the TCFD framework mandatory, the UK’s Financial Conduct Authority has issued a policy statement – and final rules and guidance – on climate-related financial disclosures for listed companies, which state that standard listed companies are required to include a statement in their annual financial report indicating whether their information complies with the TCFD, and if not, explaining why, from 1 January 2022. The objective, according to the government British: ensuring that businesses “consider the risks and opportunities they face as a result of climate change.
Persistent calls for uniform reporting and impending regulatory crackdowns come as the amount of ESG disclosures included in documents filed with the SEC, for example, has increased dramatically in recent years. “This trend will no doubt continue once the SEC introduces its climate change rules,” according to Bass, Berry & Sims attorney Kevin Douglas. Further, he notes that “there has been a significant expansion in the scope of ESG disclosures provided by many public companies (especially large-cap companies) outside of SEC filings, including through the corporate social responsibility or similar reports, and disclosures on the company’s website”. – with such efforts seen across the fashion industry, as brands seek to cater to growing consumer and investor interests.
In fact, a number of notable fashion brands and groups – including Burberry, Kering, LVMH, H&M, Fast Retailing, owner of Uniqlo, Hermès, Inditex, owner of Zara, Richemont and Tapestry – have voluntarily adopted the guidelines of TCFD reporting in recent years, likely due, at least in part, to pressure from shareholders for an accepted framework as part of their duty to those parties. In fashion, Gucci owner Kering was a pioneer, with ASICS Corp. both adopting TCFD in June 2017, closely followed by Burberry and Marks & Spencer the same year. Luxury giants LVMH, Hermès and Richemont joined in December 2020. And more recently, the parent company of Coach Tapestry, Inc. adopted TCPD standards in July 2021.
Although the list of fashion-focused TCFD supporters includes some of the biggest names in the industry, it is nevertheless a very short list – representing approximately 1% of the nearly 2,000 companies that use the TCFD framework. . This list is of course missing some of the biggest names in sportswear/activewear, as well as almost every major Western retailer, among others, raising questions as to why more brands have not chosen to adopt the voluntary framework, and whether more will follow in the future amid pressure from influential investors and ahead of further regulatory action on the ESG reporting front.
Ultimately, while companies “already feel compelled by investor demands to publish TCFD information”, Hupart argues that “imposing similar regulatory requirements may not inspire as much resistance as would caused by other types of climate information”.