The Task Force on Climate-related Financial Disclosures (TCFD) has published its final recommendations and has received public commitment from 100 global business leaders and their companies.
The final recommendations report provides a voluntary disclosure framework to improve the production and use of climate related financial disclosures. The recommendations focus on four areas of company operations;
- Governance: the disclosure of the organisation’s governance around climate-related risks and opportunities.
- Strategy: the disclosure of the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning.
- Risk management: the disclosure of how the organisation identifies, assesses, and manages climate-related risks.
- Metrics and targets: the disclosure of the metrics and targets used to assess and manage relevant climate-related risks and opportunities.
Businesses are progressively taking action to address climate change in short and long term operations as investors demand improved information. The recommendations aim to help organisations identify and disclose information to investors, lenders and stakeholders to assess climate related opportunities and risks. They also intend to drive efficient capital allocation and support the transition to a low-carbon economy.
The companies that have committed to the TCFD recommendations and goals across various industries have revenues totalling US$3.5tr and US$25tr in assets, according to the TCFD.
Task Force chair Michael Bloomberg said: "Climate change presents global markets with risks and opportunities that cannot be ignored, which is why a framework around climate-related disclosures is so important. We're pleased to see so many businesses and investors around the world support and hope others will be encouraged to join our initiative."
The TCFD was established by the Financial Stability Board (FSB) in late 2015 and in February 2017, the FSB welcomed the proposal for the TCFD to continue its work until at least September 2018. The draft of the final recommendations was released in December 2016 and received 300 responses across 30 countries. Seventy five percent of the respondents found the recommendations and guidance useful for preparing disclosures across all sectors and 77% found it useful for decision making if organisations disclosed the recommended information.
With the publication of its final report, the TCFD will focus on the promotion and adoption of the recommendations which will be presented at the G20 Summit in July by FSB chair Mark Carney.
The CDSB has been advocating for the same goals as the TCFD for the past decade as CDSB chairman Richard Samans said that there is clear value for businesses implementing the recommendations. He said that they can become more resilient to climate change risks and improve investor relationships through assessments and reporting. Building a sustainable financial system is a collective task that no individual organisation can do alone, he added before suggesting that the CDSB has the technical expertise to support implementation of the TCFD recommendations.
Similarly in a statement GRI has called upon the TCFD to work together to promote the alignment and harmonisation of climate reporting.
“Companies need clarity and the lowered burden that comes with a harmonized system for disclosing their impacts. We believe this will help the task force achieve widespread adoption of the recommendations,” the statement read.
Carney said: “The recommendations have been developed by the market for the market. They set out the disclosures that a wide range of users and preparers of financial filings have said are essential to understanding a company’s climate-related risks and opportunities. Widespread adoption will provide investors, banks and insurers with that information, helping minimise the risk that market adjustments to climate change will be incomplete, late and potentially destabilising.”
The key features of the recommendations are adoptable by all organisations and should be included in mainstream financial filings. The TCFD also recommends the disclosure of potential impacts of climate-related risks and opportunities under different potential scenarios, including a 2° Celsius scenario.
The Recommendations of the Task Force on Climate-related Financial Disclosures can be found here;
- Accountants should take ownership of climate-related financial disclosures (by Carlos Tornero)
- We Mean Business coalition urges the G20 to adopt the Task Force on Climate-related Financial Disclosure recommendations
- TCFD recommendations for climate related disclosure released