Finance ministers and central bank governors from G7 countries have agreed to mandate climate-related financial reporting, aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).
Reached at a London meeting in the run up to the G7 heads of state meeting later this week, the decision follows widespread calls for global mandatory disclosure during the recent Green Swan Conference.
The agreement puts the issue of climate disclosure firmly on the agenda of the G20 summit in October and fuels hopes for a global agreement at the pivotal COP26 summit the following month.
“We support moving towards mandatory climate-related financial disclosures that provide consistent and decision-useful information for market participants,” the finance ministers and central bankers said in the final communique from the meeting.
Concerned about the proliferation of sustainability standards, the G7 also welcomed work by the International Financial Reporting Standards Foundation to develop a global baseline standard from the TCFD framework. They hope to establish an international sustainability standards board ahead of COP26.
The G7 nations committed to a “multi-year effort to deliver the significant structural change needed to meet our net-zero commitments and environment objectives in a way that is positive for jobs, growth, competitiveness and fairness”. Further commitments were made to embed climate change and biodiversity loss considerations into economic and financial decision-making.
In addition, the group “reaffirmed” their goal to mobilise US$100 billion annually from developed countries to help developing countries adapt to climate change and the transition away from high-carbon industries.
New Zealand was the first country to announce mandatory TCFD-aligned climate-related financial disclosures in September last year, and was quickly followed by Switzerland, the UK, China and other countries. However, in all cases implementation will occur over several years.
The G7 nations are Canada, France, Germany, Italy, Japan, the UK and the USA. Together they account for over 32% of global GDP and over 23% of global greenhouse gas emissions. A recent study by insurance giant Swiss Re found that G7 economies could see annual average losses of up to 8.5% by 2050 if current levels of CO2 emissions continue. Total losses could reach $4.8 trillion (€3.95 trillion) a year – double the GDP losses caused by the Covid-19 pandemic.