Banks' climate-related disclosures in 2021 annual reports

KPMG performed benchmarking of the climate-related disclosures included in the 2021 annual reports of 35 major banks. The banks spanned the UK and Europe, Australia, Canada, Asia and the US.

Applicability

• Investors, regulators, preparers and other stakeholders interested in climate-related disclosures in banks’ annual report.

Relevant dates

Effective immediately

Key impacts

In this phase one of the benchmarking analysis, we note significant differences between countries where there is heightened regulation on climate-related disclosures and where that is not (yet) the case. This leads us to believe there is a connection between regulation and disclosures.

It appears that where there is regulation (or even regulatory guidance) on the matter, there are enhanced disclosures by banks in annual reports. We will test this finding in phase two of our benchmarking analysis where we look at the climate-related disclosures in other stand-alone reports.

The analysis comes as the historic issuance of the SEC’s climate-related disclosure proposal further pushes companies to effectively operationalize climate risks.

Financial service companies must demonstrate appropriate action to:

• Ensure consistency across financial and nonfinancial reporting and disclosures
• Integrate climate risks into governance and risk management frameworks
• Develop initial assumptions and models for climate risk scenario analysis
• Factor potentially disproportionate impacts into decision-making processes.

The global benchmarking analysis includes three key findings:

• Banks continue to focus on risk management.
• It’s all about the front part of an annual report – disclosures in the financial statements are less common.
• Metrics and targets remain vague in the annual reports. Banks have made significant commitments to sustainable finance, but without quantitative information on metrics such as financed emissions it is difficult for users to track their progress.