Climate disclosure is advancing — but who's being left behind?

Japan Times

4 days ago

The global push for climate action is becoming increasingly fragmented. While some countries move forward, others are falling behind — widening a gap that could undermine our collective ability to confront the climate crisis.
Under the Trump administration, the United States has seen a clear rollback of climate policy, with many disclosure and regulatory measures reversed or abandoned. The European Union, while sticking to its climate goals, has taken steps to ease compliance burdens for smaller businesses by effectively exempting them.
Despite these shifts, global momentum for standardized climate-related disclosure remains strong, reflecting a desire to balance regulatory ambition with economic competitiveness, rather than an abandonment of progress on climate.
The International Sustainability Standards Board continues to play a central role. Many countries are considering adopting ISSB's climate disclosure standards mainly for listed companies, which aim to bring consistency and comparability to corporate climate data. In the banking sector, the Basel Committee on Banking Supervision has also recently taken steps. In June, it finalized a voluntary climate risk disclosure framework for large banks.
But progress depends on one critical factor: the quality of data that banks receive from the companies that they finance.
As momentum builds to tackle climate change, a quieter but no less urgent problem is emerging: While many advanced economies and large corporations press forward with ambitious climate action and disclosure frameworks, others face serious capacity constraints.
The divide is no longer just about emissions — it's about awareness, resources and fairness in the transition itself.
A key driver of this imbalance is 'transition risk' — the financial exposure that companies face as economies move toward decarbonization. These risks stem directly from climate mitigation efforts such as carbon pricing, emissions targets and the transition to renewable energy. While essential, these policies carry economic consequences, especially for companies in carbon-intensive sectors. As investors and regulators increasingly demand transparency, transition risk has become central to financial reporting.
The good news is that these risks are becoming easier to quantify. Widely adopted standards like the Greenhouse Gas Protocol allow companies to track their emissions. Climate scenario models from the International Energy Agency, along with carbon price estimates aligned with the 1.5 degrees Celsius target, offer tools to assess financial exposure. These same tools help banks evaluate climate risk within their lending and investment portfolios.
The landscape of climate disclosure is expanding rapidly, with various sector-based frameworks, taxonomies, environmental and social governance scoring systems and certification schemes emerging worldwide.
But growing sophistication comes with its own challenge. While these tools aim to enhance transparency and combat greenwashing, they risk overwhelming smaller firms and developing countries that lack the institutional or technical capacity to comply. Many companies are being left behind — for lack of means.
This is where a global minimum standard becomes essential. Instead of continually raising the bar, we need to develop a baseline that any company or country can realistically meet. Such a standard wouldn't replace more advanced frameworks — it would complement them, creating a more inclusive and equitable foundation for climate accountability. After all, progress that only includes the well-resourced isn't real progress.
More importantly, climate risk isn't just about mitigation and transition risk. The other half of the equation — physical risk — is becoming more urgent by the day. Around the world, extreme weather events such as floods, droughts, wildfires and heatwaves are growing more frequent and more severe.
These risks are already inflicting major economic and social losses. Yet efforts to adapt — by building resilience to climate impacts — remain underdeveloped, even in advanced economies. Most companies and financial institutions have yet to meaningfully integrate physical risk into their strategies or disclosures.
Unlike transition risk, which is concentrated in carbon-intensive sectors, physical risk affects all countries, industries and communities — often in highly localized and variable ways. This makes it harder to define, quantify and standardize adaptation activities. In many vulnerable regions, disaster insurance coverage is shrinking or becoming unaffordable. Insurance markets alone cannot bear the burden. Governments and businesses must work together to build policy and financing frameworks that proactively address physical risk.
In the end, climate risk is not just about emissions. It's about exposure, resilience and the ability to act. If we fail to close the capacity gap — on both mitigation and adaptation — we risk building a climate transition that is exclusive, fragmented and ultimately ineffective.
Sayuri Shirai is a professor at Keio University and an adviser on sustainable policies at the Asian Development Bank Institute. She was a former policy board member at the Bank of Japan.