5 December 2014: The Climate Disclosure Standards Board (CDSB) Secretariat launched a report that proposes corporate climate change reporting requirements for adoption or support by stock exchanges, with the aim of encouraging the supply and use of information to strengthen market resilience against climate change impacts. ‘Climate resilient stock markets’ discusses why stock exchanges should act to address climate change, the current state of activity on climate change reporting and challenges and opportunities for stock exchanges wishing to employ climate change reporting approaches.

The report draws on the experience and research of organizations that have already considered the role of stock exchanges in addressing climate change and sustainability. It states that investors agree that climate change deserves special attention in corporate disclosure.

As climate resilience depends on structures to identify and mitigate risk, stock exchanges can play an important role in identifying and reducing risk and protecting the integrity of and trust in financial markets, according to the report. It explains that climate change risks share many characteristics with those associated with the financial crisis and corporate governance irregularities. Both are “imperceptible, creeping and systemic in nature and lead to widespread destruction of value and harm to the public interest.” The report emphasizes that future climate risks are linked to present decisions, including the way in which capital is invested and regulated.

Stock exchanges are able to: engage and collaborate with companies, investors and others; support capacity building and transparency by promoting and sharing best practices; monitor market developments and bring cases to the attention of securities and regulators; support emerging markets and the sustainable development goals (SDGs); develop guidance, training, tools and methods to enable reporting; and require companies to adopt and implement reporting requirements for non-financial information.

While progress has been made to build capacity in corporate reporting, the current approach is fragmented, says the report. Some stock exchanges already: require or encourage the disclosure of material sustainability, environmental and climate change related-information; and participate in coalitions and specialist working groups to address climate change and other sustainability-related issues. However, quality, quantity, type and location of information vary and has led to a lack of consistency and comparability, limiting its use for decision-making. The report’s proposed requirements adopt and extend existing reporting structures by incorporating emerging reporting trends and supporting assurance activity.

CDSB launched the report at the Lima, Peru, stock exchange and presented the report on the sidelines of the Lima Climate Change Conference. [CDSB Press Release on Report Launch] [CDSB Report Website] [Publication: Climate resilient stock markets] [IISD RS Coverage of Lima Climate Change Conference]