Investors are struggling with a “high degree of inconsistency” in the climate data and information they receive in corporate disclosures, according to a new report.

From the CFA Institute, an international association for investment professionals, the report on climate data in the investment process argues investment managers have difficulties gauging climate risk because of “inconsistent and unreliable” information.

Companies are a key source of information (though not the only one), yet it remains a problem.

The report says there is inconsistency in the way companies “define, measure and calculate climate data and metrics; and even the timing of the disclosures, which vary according to fiscal years among companies”.

Publication of climate data might also not coordinate with financial statements “leading to difficulties in interpreting carbon metrics based on financial disclosures”.

The institute also notes that “companies struggle with obtaining the resources and expertise needed to collect, calculate and report the information investors and regulators are looking for”.

As easy as 1, 2… 3?

There are further information blocks. Data providers have little coverage of emerging markets; more companies disclose Scope 1 and 2 emissions than disclose Scope 3; large companies are more likely to commission assurance of their climate disclosures; and, in general, large companies are more likely to provide climate data.

The report comes at a time when pressure is building to make more climate disclosures mandatory. Large UK companies have to report using guidelines drawn up by the Task Force for Climate-related Financial Disclosures (TCFD).

UK companies also await news on whether they will be required to implement two new reporting rules introduced by the International Sustainability Standards Board. Some investors have already endorsed use of the new standards though they are yet to be adopted by corporate reporting watchdogs.

Meanwhile, in Europe, companies are implementing the Corporate Sustainability Disclosure Directive (CSRD) , a major revamp of non-financial reporting. The CSRD goes much further than either the US or international standards by applying the concept of “double materiality”: companies must report not only the impact of climate change on their operations but also the company’s impact on the environment.

US challenge to rules

US companies too face new disclosures rules, though progress has been suspended as regulators deal with legal challenges to the new measures.

US standards do not require disclosure of Scope 3 emissions, those generated from supply chains, a problem for disclosure in some industries where most emissions would, in effect, be Scope 3.

At present, although some “interoperability” is expected between the new reporting frameworks, the CFA Institute remains sceptical, saying “it appears unlikely that interoperability will result in a global disclosure baseline.”

Despite the hurdles, the institute recommends investors use their judgement to make “effective use” of existing data provisions and be aware of the data’s limitations.

“Until regulations and standards can provide meaningful solutions, investors should not be deterred from using climate-related data,” the institute concludes.