Climate change represents one of the biggest systemic risks for society, the economy and private institutions. The private sector is increasingly under pressure from stakeholders to facilitate the transition to a climate-resilient economy. Climate-related disclosures are a first step to building climate awareness and taking action.
The catastrophic effects of climate change are already visible, with extreme weather around the world damaging property, disrupting economic activity and harming human life. Mitigating climate change and reducing greenhouse gas (GHG) emissions are major global challenges.
Policy measures from the UN's 2015 Paris Agreement to the EU's long-term climate strategy and the 2019 Dutch Climate Agreement ('Klimaatakkoord') are setting global objectives and encouraging urgent action. Unfortunately it has become clear that existing levels of investment are insufficient to meet these ambitions. For example, the European Commission has estimated that a further €180 billion of annual investments in energy efficiency, renewable energy and other mitigation measures will be required in order to achieve the EU's 2030 climate target of a 40% reduction in GHG emissions.
Mobilizing capital to fund sustainable investment is essential. The first step is building an awareness of climate impacts. Via disclosure of climate information, companies can help investors and governments redirect capital away from areas of negative environmental impact to those activities which support climate mitigation – such as energy efficiency and renewable energy projects, development of low carbon products and services, and companies that are measuring, managing and reducing their GHG emissions. Voluntary initiatives like CDP and the Task Force on Climate-related Financial Disclosures (TCFD) provide useful frameworks for companies to follow when assessing and disclosing climate-related impact and risk.
CDP, formerly the Carbon Disclosure Project, runs a global disclosure system to support companies in measuring and reporting their climate impacts. Through an annual reporting request, CDP encourages over 7,000 of the world's largest companies to report their GHG emissions as well as their approach to climate strategy, governance and risk management. This data is then analyzed and shared with investors and decision makers to support climate action.
The TCFD was established by the G20's Financial Stability Board to develop recommendations for voluntary climate-related financial disclosures that would provide information to investors to facilitate their decision-making. Companies are encouraged to follow recommendations made in four thematic areas – governance, strategy, risk management, metrics and targets – when preparing their own annual sustainability reporting for publication.
At Aegon we believe that governments, companies and investors have a responsibility to mitigate the impacts of a changing climate and facilitate a transition to a climate-resilient economy and we encourage climate disclosures in support of broader actions. That is why Aegon has responded to the CDP questionnaire annually since 2010 and follows TCFD recommendations in our own reporting, most recently with an eight-page 'report-within-a-report' in our 2018 Responsible Investment report.