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Insig AI analysis shows FTSE 100 companies are not up to scratch on climate disclosures

21 September 2022

ESG disclosure specialists, Insig AI, highlight that 70 percent of FTSE 100 companies are not meeting stakeholder expectations on climate-related disclosures despite the increase in net zero pledges from larger companies. 

Insig AI, an AI and machine learning company serving the asset management industry, analysed climate-related disclosures published by the largest 100 listed companies in the UK over the past seven years (2015-2021).  They found that the leading 30 companies are setting the bar for the volumes of disclosure that investors can expect around how a company is managing its climate-related risk, and reporting around issues such as decarbonisation and net-zero. At the same time, 69 companies fell below the average volume of disclosure in 2021. 

Insig AI’s analysis found a wide discrepancy between these leaders and the laggards within the FTSE peer group, with the bottom 30 companies reporting 87 percent less on these issues than the leaders in 2021.

FTSE leaders typically feature high-impact sectors such as materials, energy and industrials, but when these sectors are excluded, the gap between leaders and laggards is still evident for other sectors. In the consumer staples sector , Associated British Foods (ABF), Coca-Cola and Sainsburys have a disclosure gap of 85 percent to the sector laggards, Ocado, Tesco and Imperial Brands in 2021. 

With the Task Force on Climate-related Financial Disclosures (TCFD) applicable to all sectors and now mandatory on a comply or explain basis for the FTSE, it raises the question of readiness to meet regulatory standards and exposes that many major corporations are still being reactive rather than proactive in their approach to reporting.

Analysis of the correlation between market cap and levels of disclosure over the past seven years reveals some positive correlation as expected (energy, industrials, communications services, materials), with some notable exceptions; the real estate sector for example shows the strongest negative correlation which, given their key role in the green transition, is surprising.

 

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