The Value of Transparent Climate Risk Reporting & TCFD for Tech Companies

As climate regulations like California’s SB261 and the SEC’s proposed climate disclosure rule become more prevalent, many software companies are quick to assume these laws don’t apply to them. They see climate risk reporting as a burden, meant for industries like manufacturing or insurance. But this mindset is a mistake. Climate risk impacts all businesses—including software companies—and ignoring it could have serious consequences for your company’s resilience, reputation, regulatory compliance, and investor relations.

The Regulatory Landscape: What You Need to Know

California’s SB261 requires US companies making more than $500 million annually to disclose climate-related financial risks. SB261 requires the first reports by January 2026. The SEC’s climate disclosure rule creates a standard framework for reporting these risks for all publicly traded companies, making it easier for investors to understand the financial implications of climate change. The SEC’s rule is currently stayed pending litigation, but if it passes then it will require reporting in the next 2-4 years. These rules aren’t just theoretical; they are already reshaping how companies of all sizes approach climate risk.

Even if your company doesn’t think it’s directly affected, the risks are real. Non-compliance could result in fines, lawsuits, or reputational damage. And beyond avoiding penalties, embracing transparency about climate risks can turn a regulatory obligation into a competitive advantage.

Why Investors Care About Climate Risk

Many software companies think climate risk is only relevant to businesses with physical assets or complex supply chains. But that’s a misconception. Even tech companies face real climate risks, and investors know it.

Consider your data centers. They are essential to running your operations, yet they are vulnerable to climate-related disasters like wildfires, floods, and heatwaves. A major event impacting a key data center could disrupt services, degrade performance, and lead to financial losses.

Beyond infrastructure, your employees are another critical asset. Imagine a scenario where a key engineering team or senior leader is impacted by a natural disaster—perhaps a hurricane in Miami or wildfires in California. Even remote work doesn’t eliminate the risk of business interruption when people are cut off from resources and unable to work for days or even weeks. Investors are looking for companies that have plans in place to ensure business continuity in such scenarios.

Revenue is at risk, too. Many software companies serve small- and medium-sized businesses (SMBs), a sector highly susceptible to climate risks. A hurricane, wildfire, or flood could put your customers out of business, leading to decreased revenues and higher churn for your company. If your company can’t demonstrate that you’re considering these cascading risks, investors will have legitimate concerns about your long-term resilience.

In short, tech companies are not immune to climate risk, and transparency about how you’re mitigating these risks is essential for building investor confidence. It shows that you’re prepared, resilient, and have the foresight to protect your business and their capital.

Strengthening Company-Investor Relationships

Transparent climate risk reporting doesn’t just fulfill regulatory requirements—it builds trust with your investors. Investors are seeking companies that understand their current risks and are proactively preparing for future challenges. By clearly disclosing your strategies for managing climate risk, you signal that you are a long-term, reliable partner.

Microsoft is a prime example of a tech company that has used climate transparency to its advantage. Through comprehensive reporting, they’ve assured investors of their risk management while also showcasing how sustainability can drive new business opportunities. This has not only strengthened relationships with their existing investors but also attracted capital from sustainability-focused funds, further enhancing their market position.

Investors are already asking for a lot of this information. Apollo Global Management, one of the world’s largest private equity firms, recently announced that it reviewed physical and transition risks on $50b of assets in its portfolio. In the public markets, CalSTRs, a $350b pension fund, voted against over 2,200 boards this year and expects it’s investments to publish TCFD reports.

Reputational Benefits of Climate Transparency & TCFD

While investors are a key audience for climate disclosures, they’re not the only ones. Customers, employees, and regulators all take notice of how companies address climate risks. Businesses like Salesforce, which has been transparent about its climate goals and risks, have benefited from improved brand perception and customer loyalty.

In an era where both consumers and employees are increasingly concerned about sustainability, failing to be transparent about your climate risks could harm your brand and make it harder to attract top talent. Conversely, a strong climate strategy can be a powerful tool for differentiation.

Transparent climate reporting also positions your company for long-term success. Many investors now integrate climate risk into their due diligence process, and companies that embrace transparency tend to have better access to capital and face fewer questions about their resilience during economic downturns.

Conclusion: Don’t Underestimate the Value of Transparency

For tech companies, climate risk might not seem as urgent as for other industries, but the reality is that climate events can disrupt operations, impact employees, and weaken customer bases. Investors want to know that you understand these risks and have a plan to mitigate them. Proactive climate risk disclosure isn’t just about regulatory compliance—it’s about fostering trust, protecting your brand, and ensuring your company is prepared for the future.

If your company hasn’t started thinking about climate risk reporting, it’s time to start. Investors are watching, and transparency will help keep you ahead in a changing world.

Reach out to sales@beehiveclimate.com to see how we can help.