Over the course of the last decade, a number of global financial banks – including BBVA- have aligned with the recommendations on non-financial reporting and disclosures issued by different international organizations. Including, the Financial Stability Board and its recommendations through the Climate-Related Financial Disclosures Working Group (TCFD), the UN Environment Programme - Financie Initiative (UNEP FI), or the different national legislations . These suggestions are intended to help companies raise awareness about their environmental commitment by including and disclosing information on climate related risks and opportunities.
Faced with this scenario, national regulations and business organizations have decided to follow the same path: align their activity and guidelines to accelerate the green, zero carbon economy. They also seek to incorporate data on their performance in their annual reports, and increase transparency when reporting on the impact of their activity on society. These documents - integrated reports - ensure that organizations report on their financial and non-financial activities in a consistent manner. In turn, they inform long-term value creation.
These reports are a key tool to provide answers to some of the main questions stakeholders are concerned about, without ignoring everything related to the needs of employees, suppliers, customers, creditors, communities and the environment. In short, to address an issue that society has been demanding for a long time: that organizations defend ethical values and implement socially responsible and sustainable business models.
The Principles for Responsible Banking and the Collective Commitment to Climate Action (CCCA)
These pro-transparency initiatives started in the early 1990s, when the UN launched the Financial Initiative of its Environment Programme (UNEP-FI). An alliance between the international organization and the financial sector currently striving to define a guide to help banks incorporate sustainability considerations throughout their operations and areas. BBVA is one of the founders of the Principles for Responsible Banking, and BBVA Global Head of Responsible Business Antoni Ballabriga has co-chaired the UNEP FI Global Steering Committee since 2019.
In line with these principles, UNEP FI promoted the collective commitment to climate change. which requires its signatories to commit to publicly report on the measures they adopt on climate change matters. The first report was compiled during the summer of 2020 and will be published on the UNEP FI website in of October.
The TCFD report: a window to climate impact
Regulations and recommendations have evolved in a way such that in 2015 the Financial Stability Board (FSB) identified that it was imperative for organizations to improve their disclosures on how climate change affected their businesses and activities, and the exposure of their organizations in terms of risks and opportunities.
The FSB, at the request of the G20, created the Task Force on Climate-related Financial Disclosures to create a framework of recommendations. In 2017 the TCFD published a guide whose purpose was to ensure that disclosures are consistent, reliable, and clear. Thus, businesses will be ready to face new challenges as they emerge while providing the necessary information to allow investors to assess the company's climate performance.
This task force is led by Michael Bloomberg (former Mayor of New York) and includes prominent figures such as Mary Schapiro, head of the Secretariat, or Christian Thimann, former co-chair of UNEP FI. These recommendations are backed by governments, investors and financial leaders and were recently translated into Spanish to foster broader adoption across the Spanish-speaking business community.
TCFD reports must comply with the following points:
- They must be adoptable by all organizations, financial and non-financial.
- They must be included in financial filings, turning the annual report into an integrated report.
- The report should be designed to solicit decision-useful, forward-looking information on financial impacts.
The TCFD established that reports should be structured around four core elements: These must be related to governance, strategy, risk management, and metrics and targets.
Regarding governance, it noted that reports should clearly state the position of the board and the organization's management in the assessment of climate-related risks and threats. The entire organization must be aligned in this regard.
As for the strategy, reports should disclose the current and potential impact of risks and opportunities on business and financial planning. In addition, they should also define the company’s resilience, i.e. its ability to overcome the climate-related challenges.
Regarding risk management, the recommendations emphasize that reports should identify, assess and manage climate-related risks. Finally, the recommendations establish the need to report on the metrics and data analyzed and used to reach the above conclusions.
Another key aspect that the Task Force singled out is that reports should collect and disclose the risks and opportunities facing the organization, as well as their estimated financial impact. those related to the transition to a low emission and energy sustainable economy; and those risks related to the physical impacts of climate change.
BBVA and the TFCD recommendations
As one of the early-adopters of the sustainable strategies promoted by the United Nations, BBVA observes the recommendations set forth in 2017 by the TCFD both in its decision making processes and the disclosure of their impact in its annual reports. In 2018, it described all the actions and financial impact related to climate change in its annual report, under the heading 'Sustainable Finance', which also included the organization's Global Eco-efficiency Plan. This action plan is included in BBVA's Pledge 2025.
Likewise, the bank was recognized as Best Sustainable Bank in Spain 2020 by Capital Finance International, print journal news and online resource reporting on international business, economics, and finance. In reaching its verdict, the jury cited the initiatives adopted by the bank around this matter, which includes the fight against climate change. For 2025, the goal is to mobilize €100 billion. As of June 30, 2020, the bank had already reached 40 percent of this overall target.