The CRORI

For each of the recommendations, the TCFD analysis grid provides guidelines to help companies to define their issue and disclose the reliable information according to the four domains. In order to transform the information into quantitative and therefore analyzable data, we choose to transform the guidelines of the TCFD into closed-ended questions.

Using the section 3-Guidance for all sectors of the TCFD final report, we derived 27 closed-ended questions and sub-questions (score ranging from 0 to 1). More precisely, we identify:

- 2 questions and 3 sub-questions for governance
- 5 questions and 2 sub-questions for strategy
- 7 questions for risks management
- 5 questions and 3 sub-questions for targets and metrics

Details of the coding grid:

Number	Questions	Possible answers	Score
Question 1	Does the company report if the board is informed about climate-related issues?	Yes No	1 0
Sub-question 1.a	Does the firm explicitly disclose the number of meetings in which the board of directors participates and which deal with this issue?	Yes No	1 0
Sub-question 1.b	Does the company provide information on how the board assesses progress and sets targets with respect to climate change?	Yes No	1 0.5 0
Question 2	Does the company report the responsibilities assigned to managers with regard to climate change?	Yes, precisely and/or quantified Yes, but not explicitly No	1 0.5 0
Sub-question 2.a	If so, do these responsibilities include the assessment and management of topics related to climate change?	Yes, precisely and/or quantified Yes, but not explicitly No	1 0.5 0
Question 3	Does the company specify the time horizons associated with the concepts of short, medium and long term?	Yes No	1 0
Question 4	Does the company identify the main risks associated with climate change and their impacts?	Yes, precisely and/or quantified Yes, but not explicitly No	1 0.5 0
Question 5	Does the company identify the main opportunities associated with climate change and their impacts?	Yes,precisely and/or quantified Yes, but not explicitly No	1 0,5 0
Sub-question 5.a	If so, does the company identify the distribution of these risks and opportunities at sectoral and/or geographical level?	Yes, precisely and/or quantified Yes, but not explicitly No	1 0.5 0
Question 6	Does the company disclose the CAPEX and OPEX impact of the risks and opportunities associated with climate change?	Yes, precisely and/or quantified Yes, but not explicitly No	1 0.5 0
Question 7	Does the company study the resilience of its business through scenario analysis?	Yes, precisely and/or quantified Yes, but not explicitly No	1 0.5 0
Sub-question 7.a	If so, does the company specify the time horizon of the analysis it conducts?	Yes No	1 0
Question 8	Does the company describe the processes by which it identifies the risks associated with climate change?	Yes, precisely and/or quantified Yes, but not explicitly No	1 0.5 0
Question 9	Does the company explain how it assesses their significance in relation to other business risks?	Yes No	1 0
Question 10	Does the company indicate whether current or future regulations are included in this risk assessment?	Yes No	1 0
Question 11	Does the company indicate how the materiality levels of these risks and opportunities have been estimated?	Yes, precisely and/or quantified Yes, but not explicitly No	1 0.5 0
Question 12	Does the company indicate how it manages the risks associated with climate change?	Yes, precisely and/or quantified Yes, but not explicitly No	1 0.5 0
Question 13	Does the company explain how it decides whether or not to prioritize the risks associated with climate change?	Yes, precisely and/or quantified Yes, but not explicitly No	1 0.5 0
Question 14	Does the company report how the processes for identifying and managing risks associated with climate change are integrated into the overall risk management process?	Yes, precisely and/or quantified Yes, but not explicitly No	1 0,5 0
Question 15	Does the company indicate whether it monitors indicators on the following topics: water, energy, land use, waste management?	For the four areas For three areas For two areas For asingle area No	1 0.75 0.5 0.25 0
Sub-question 15.a	If so, does the company provide historical data?	Yes, for all indicators Yes, for some indicators No	1 0.5 0
Question 16	Does the company indicate whether it calculates its green share or if it uses an internal carbon price?	Yes No	1 0
Question 17	Does the company provide figures on the level of its Scope 1 & 2 emissions?	Yes No	1 0
Sub-question 17.a	If so, does the company provide the evolution of these indicators over time?	Yes No	1 0
Question 18	Does the company provide figures on the level of its Scope 3 emissions?	Yes No	1 0
Sub-question 18.a	If so, does the company provide the evolution of these indicators over time?	Yes No	1 0
Question 19	Does the company communicate the objectives it has set for itself in terms of managing climate risks and opportunities?	Yes, precisely and/or quantified Yes, but not explicitly No	1 0.5 0

Given the specificities of our data, we use a weighted linear aggregation method to compute the index, the Climate Risks and Opportunities Reporting Index (CRORI) :

with the weight of the i^th question, the company’s score for the i^thquestion, i = 1 , … , 27

We relied on the TCFD framework to determine the different weights to be assigned to each question/sub-question. This analysis of TCFD’s recommendations results in the following 4 rules:

Rule (1) Each domain is equally important, so the domains are equally weighted.
Rule (2) Within a domain, each recommendation has the same importance, so the recommendations are equally weighted.
Rule (3) Each recommendation is reflected in a set of questions (Qk) and sub-questions
Rule (4) When there are sub-questions, the weight assigned to the question is twice the weight of the sub-question(s).

The total weight of each question (including the weight of each sub-question) is calculated as follows:

with D, the k^ththeme of the TDCF, the number of recommendations for each theme k (k=1,2,3,4) and the number of questions for each recommendation

We then compute the CRORI of CAC 40 companies over the period 2015-2018. The aim of this empirical analysis is two fold:

to test the methodological robustness of the CRORI
to compare voluntary environmental disclosure practices before and after the publication of TCFD’s recommendations.