The TCFD recommendations encourage clear reporting about how climate change financially impacts companies across four pillars: governance, strategy, risk management, and metrics and targets.
The Financial Stability Board established the Task Force on Climate-related Financial Disclosures (TCFD) to develop recommendations for more effective climate-related disclosures that could promote more informed investment, credit, and insurance underwriting decisions and, in turn, enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system’s exposures to climate-related risks.
The TCFD recommendations on climate-related financial disclosures are widely adoptable and applicable to organizations across sectors and jurisdictions. They are designed to solicit decision-useful, forward-looking information that can be included in mainstream financial filings.
The recommendations are structured around four thematic areas that represent core elements of how organizations operate: governance, strategy, risk management, and metrics and targets.
The TCFD is committed to market transparency and stability. Better information will allow companies to incorporate climate-related risks and opportunities into their risk management and strategic planning processes. As this occurs, companies’ and investors’ understanding of the financial implications associated with climate change will grow, empowering the markets to channel investment to sustainable and resilient solutions, opportunities, and business models.
Today, more than 1,900 organizations across 78 countries support the TCFD, including more than 800 financial firms managing $175 trillion of assets.
Over 110 regulators and government bodies support the TCFD, including the UK, Hong Kong, Switzerland and New Zealand, which are making the recommendations mandatory.
Climate change poses both risks and opportunities for business, now and in the future. As the Earth’s temperature rises, increasingly common natural disasters are disrupting ecosystems and human health, causing unanticipated business losses, and threatening assets and infrastructure. In response, governments and private sector entities are considering a range of options for reducing global emissions, which could result in disruptive changes across economic sectors and regions in the near term.
Without reliable climate-related financial information, financial markets cannot price climate-related risks and opportunities correctly and may potentially face a rocky transition to a low-carbon economy, with sudden value shifts and destabilizing costs if industries must rapidly adjust to the new landscape.
We’re currently engaged in helping companies implement the recommendations and promoting advancements in the availability and quality of climate-related disclosure.
The adoption of the TCFD recommandations can help companies demonstrate responsibility and foresight. Better disclosure will lead to more informed and more efficient allocation of capital, and help facilitate the transition to a more sustainable, lower-carbon economy.
TCFD Chair, Michael R. Bloomberg, September 2020
