Manila Bulletin
Environment and Sustainability
Driving ambition: A gear shift to TCFD toward achieving NDCs and beyond
Environment and Sustainability
Driving ambition: A gear shift to TCFD toward achieving NDCs and beyond
Driving ambition: A gear shift to TCFD toward achieving NDCs and beyond
Published Jun 1, 2023 07:02 pm
*Written by Judd P. Tablazon,
Associate Director
, and Francis Jemaiya Arce,**Senior Associate, Climate Change and Sustainability Services, SGV & Co.**
The future as told by science
Trends show that the Earth’s temperature is rapidly increasing. Science agrees that with a scenario of high GHG emissions, there is a high probability of a 1.5°C increase between 2021 and 2040 and by 2100, a 3.3°C to 5.7 °C increase in global average temperatures relative to pre-industrial levels. This increase can be attributed to the high concentrations of heat-trapping gases in the atmosphere called greenhouse gases (GHG), primarily carbon dioxide. Its overabundance in the atmosphere is a pervasive threat globally and experts are calling for decarbonization, which entails the reduction and removal of GHG emissions resulting from human activity. Based on data from Climate Watch of the World Resources Institute, the Philippines has a total GHG emissions level of 236.79 MtCO2e, and a per capita emissions level of 2.19 tCO2e. While the Philippines is well below the world average of GHG emissions per capita of 6.5 tCO2e, there is still much to achieve in emissions reduction with the submission of the country’s Nationally Determined Contributions (NDCs) to the United Nations Framework Convention on Climate Change (UNFCCC). In April 2021, the Philippines provided its commitment to this global effort, with a 2.71% unconditional and 72.29% conditional avoidance and reduction, as part of the country’s ambition to mitigate GHG emissions from 2020 to 2030, in line with business-as-usual projected emissions of 3,340.3 MtCO2e.Small steps, giant leaps
To effectively reduce and remove as much carbon emissions as possible, we must know which of our activities emit GHG and how much is being emitted. Hence, in December 2015, the Task Force on Climate-Related Financial Disclosures (TCFD) was created to develop recommendations on corporate disclosures across the elements of corporate governance, strategy, risk management, and even corporate metrics and targets that would facilitate decarbonization. Globally, the TCFD recommendations previously tagged as voluntary, were incorporated into regulatory frameworks in jurisdictions like the European Union, Japan, New Zealand, and Singapore. The TCFD framework gives the backbone of reporting climate-related information. Through the adoption of TCFD in sustainability disclosures, there is a more specific presentation of climate risk and opportunities related information, allowing stakeholders to examine how much exposure a company has, making it an avenue for a more comprehensive and standardized source of information. With the growing number of more than 3,800 companies supporting TCFD, the Philippines would do well to catch up with the world. Legislation-wise, there have also been efforts to pursue a low-carbon economy through recent bills such as Senate Bill No. 1992 and House Bill No. 7705. The proposed Low Carbon Economy bills were drafted to be able to establish a “nationally appropriate market-driven system of tradable GHG allowance.” Under the proposed cap and trade system, annual emission avoidance or reduction targets, including the sector/s and levels to be covered, will be set yearly. A cap will be imposed on the GHG of covered sectors and an annual quantity of GHG emissions allowances equal to the allowed emissions under the yearly cap will be issued. To cushion the impact of a cap, the bills allow for trading of credits. Entities with excess GHG emissions may buy allowances from the market, while those with less GHG emissions may sell their allowances to the market, under a central registry, trading and reporting system under the Department of Environment and Natural Resources. Other provisions of the bills provide for institutionalizing a national GHG inventory and management system, led by a Climate Change Commission with strong involvement of relevant agencies; development of a Quality Assessment Review System of Local Climate Change Action Plans; institutionalizing a tagging and tracking tool for adaptation and mitigation programs and projects, known as the Climate Change Expenditure Tagging; and the establishment of a primary information platform known as National Integrated Climate Change Database and Information Exchange System.Into the finish line and beyond
With this advancement in the country’s commitments to contribute to sustainability, it is also important to improve the reporting frameworks we use in our disclosures. The TCFD identifies companies that support the use of its framework. In the Philippines, only 22 entities are listed in various sectors, such as real estate, utilities, industrials, communication services, financials, government, materials, energy, and consumer staples. While we are making strides to report climate-related information such as emission inventories, and some identified risks and opportunities, aligning with the recommendations of TCFD allows companies to better assess and disclose risks and opportunities, and in turn allow for better decision-making as we transition to a low carbon economy. The recent 2022 EY Global Climate Risk Barometer addressed the question, “When will climate disclosures start to impact decarbonization?” It cited findings on a 14% increase in the score for coverage of the TCFD recommendations for the analyzed corporate reports; however, the average score for quality was still at 44%, presenting a significant gap between coverage and quality of the reports. This means that while more companies are reporting on climate risk, they are still struggling to provide meaningful disclosures around the challenges they face. This gap can be narrowed by setting value-contributing targets and monitoring progress and by reviewing business and operational strategies regularly, applying scenario analysis. Partnering and fostering a collaborative culture to allow the fruition of ambitious decarbonization targets is also a key strategy to bring about quality. Finally, companies can consider venturing into other opportunities which can transform business portfolios, keeping in mind emissions reduction. Larger steps need to be undertaken not only in initiatives, but also in existing frameworks, regulations, and upcoming legislation. Climate action is a global effort that deserves more cooperation and partnership between the public, the corporate world, and the government. Now, more than ever, is our chance for a global turnaround. Our deadline is up ahead. Time is running out.