Climate-Related Financial Risks and Opportunities: an overview of reporting frameworks and the implementation of the TCFD Recommendations in corporate disclosure

Climate change is one of the toughest challenges of all times, whose anthropogenic origins have been defined by scientists as unequivocal. The current unprecedented atmospheric concentration of human-driven greenhouse gases (GHG) is indeed extremely likely to be the dominant cause of observed global warming, which has already reached 1°C above pre-industrial levels. According to the latest scientific findings, the rise in global mean temperature should be limited to 1.5°C by the end of the century, a scenario that could only be enabled by deep and rapid cuts in anthropogenic GHG emissions. Alongside an illustration of the best science available on climate change and its present and future consequences, an overview of the key milestones in international climate negotiations will also be provided. Considering the scale of the challenge, the strongest coordinated international effort is expected by all global actors, from governments to citizens and, equally important, from private companies to investors. In particular, the dissertation will mainly focus on the crucial role played by corporations and financial markets in the transition to a lower-carbon economy. Contrarily to the copious studies addressing the direct and indirect impacts caused by business activities on the environment, the purpose of this thesis is to highlight how climate change, in turn, can massively affect organizations of all sectors and locations, hitting their operations, supply chains, economic results, financial positions, and disclosure requirements. Adopting a managerial and sustainability accounting perspective, we will concentrate on the rapidly evolving field of climate-related financial risks and opportunities, both of a physical and transitional nature, whose accurate assessment and disclosure are becoming increasingly requested by providers of financial capital. In fact, were climate-related issues to be neglected and not transparently considered nor communicated, they may lead to diffused mispricing on financial markets and, ultimately, severe threats to financial stability. After an initial analysis of the major initiatives and frameworks involved in sustainability and climate change reporting in general, spotlights will be turned on the most recent and developed guidelines to report on climate-related financial risks and opportunities, issued in 2017 by the industry-led Task-Force on Climate-related Financial Disclosures (TCFD). The structure and content of its recommendations will be illustrated, touching on the Framework's main traits and delicate features, such as its voluntary-based adoption and the provision to disclose climate-related information within mainstream annual financial filings. In fact, among other things, it will emerge how wide is the potential for integration between climate-related risks disclosure and the traditional financial reporting practice and standards. Finally, to gather a more complete understanding of the TCFD Framework's implementation status, the results of a practical analysis conducted on the corporate disclosure of a sample of twenty Italian listed companies will be presented; although recognizing the limitations of such small-scale research, it still allowed to draw some conclusions on the trends developing in the TCFD-aligned corporate reporting and, eventually, on the existing best practices.