Within the last three years, Canada’s financial firms have increasingly begun providing insight on their material climate-related risks and goals in alignment with recommendations from the Task Force on Climate-related Financial Disclosures (TCFD),

A new study from the Global Risk Institute in Financial Services (GRI) said there’s been a 40% increase in the number of companies that provide TCFD-related disclosure and information. There are now 25 firms, include big banks and pension funds, that follow TCFD recommendations, compared to 16 firms in 2017.

The study examined the three annual reporting cycles that occurred between 2017 and 2019, looking at 58 firms, including pension funds, banks, insurance companies, credit unions, asset managers and financial Crown corporations. The top three spaces covered were banks (24%), pensions (22%) and insurance (19%).

The study analyzed annual reports, management discussion documents and proxy circulars, alongside firms’ dedicated sustainability reports and a survey that was done by the CDP — a not-for-profit that was previously called the Carbon Disclosure Project.

The study found that firms “are generally on track” with the Expert Panel on Sustainable Finance’s recommendation to gradually phase in TCFD reporting requirements, with larger firms leading the charge.

Specifically, the expert panel recommended companies adopt a two-phased approach to TCFD reporting. Phase one includes general governance and risk disclosures and, by 2022 for large firms and 2024 for small firms, carbon emissions information. Phase two includes more detailed disclosure for large and small firms by 2024 and 2026, respectively.

“Three quarters of the largest companies are already underway with phase 1, making progress against the target date of 2022, and nearly half have completed the requirements for phase 1 and have moved into phase 2,” the report stated, citing data from 2019.

While the majority of smaller firms have yet to start following TCFD recommendations, they have “the opportunity to learn from other firms, and will benefit from further guidance expected to be issued by Canadian regulators and supervisors, the TCFD and other bodies over the coming years,” the report said.

Every disclosing firm identified by GRI was monitoring climate risk, the report said, noting that many firms have chief risk officers. Further, 80% of these firms were looking at short-, medium- and long-term risks, with 24 out of the 25 firms using climate-risk scenario analysis, up from seven in 2017.

“In 2019, 72% of firms disclosed metrics related to portfolios and sustainable finance, a 35% jump since 2017,” the report said.

Sonia Baxendale, president and CEO of GRI, said in a release that Canada has “all the right ingredients to be competitive in a low-carbon future,” and suggested the financial sector is best-positioned to help businesses, investors and Canadians embrace sustainable practices.

“As the world shifts to a low-carbon economy, there will be increasing expectations, and we need to ensure that Canada’s natural resource-based economy is an asset and not a liability,” Baxendale said.