ESG

Understanding
TCFD

Curated and written by

Pratiksha More
Sustainability101
Introduction
The Task Force on Climate-related Financial Disclosures was
created in late 2015 to help identify information needed by
the financial sector to appropriately assess and price climate-
related risks

The G20 Finance Ministers and Central Bank Governors asked the Financial

Stability Board (FSB) to review how the financial sector can take account

of climate-related issues.

In response, the FSB established the Task Force on Climate-related

Financial Disclosures (TCFD) to develop recommendations for more

effective climate-related disclosures.

Introduction to the TCFD
Recommendations
The Task Force developed four widely-adoptable recommendations on climate-related financial disclosures,
published in June 2017

Governance

Strategy

Risk Management

Metrics and Targets

 Overview of the TCFD Recommendations
Governance
Disclose the company’s governance
around climate-related risks and
opportunities
Recommended Disclosures
a) Describe the board’s oversight of
climate-related risks and opportunities.
b) Describe management’s role in
assessing and managing climate-
related risks and opportunities.
Strategy
Disclose the actual and potential impacts of
climate-related risks and opportunities on
the company’s businesses, strategy, and
financial planning where such information is
material.
Recommended Disclosures
a) Describe the climate-related risks and
opportunities the company has identified
over the short, medium, and long term.
b) Describe the impact of climate- related
risks and opportunities on the company’s
businesses, strategy, and financial planning.
c) Describe the resilience of the company’s
strategy, taking into consideration different
climate- related scenarios, including a 2°C or
lower scenario.
 Overview of the TCFD Recommendations
Risk Management
Disclose how the company identifies,
assesses, and manages climate-related
risks.
Recommended Disclosures
a) Describe the company’s processes for
identifying and assessing climate-
related risks.
b) Describe the company’s processes for
managing climate- related risks.
c) Describe how processes for identifying,
assessing, and managing climate-related
risks are integrated into the company’s
overall risk
Metrics and Targets
Disclose the metrics and targets used to
assess and manage relevant climate-related
risks and opportunities where such
information is material.
Recommended Disclosures
a) Disclose the metrics used by the
company to assess climate- related risks
and opportunities in line with its strategy
and risk management process.
b) Disclose Scope 1, Scope 2, and, if
appropriate, Scope 3 greenhouse gas
(GHG) emissions, and the related risks.
c) Describe the targets used by the company
to manage climate- related risks and
opportunities and performance against
targets.
Overview of the TCFD Recommendations

Recommendation Recommended Disclosure

a) Board Oversight

Governance
b) Management's Role

a) Climate related risk and opportunities

b) Impact on Company
Strategy
c) Resilience of Strategy

a) Risk Identification and Assessment

Processes
Risk Management
b) Risk management Processes

c) Integration into Overall risk

management
a) Climate related Metrics

Metrics and Targets b) Scope 1, Scope 2, and Scope 3 GHG

Emissions

c) Climate-Related Targets
How the Task Force on Climate-
Related Financial Disclosures (TCFD)
Works
The goal of these recommendations was to provide companies a structure and

impetus for disclosing this information so as to better inform financial markets and

investors.

These recommendations are voluntary and are in place as guidelines to assist

businesses in identifying and sharing both risks and opportunities they face as a

result of climate change.

In turn, investors, lenders, insurers, and other participants in the market will have a

more complete picture when assessing the value of those companies and the risks

they face.

A goal of the TCFD is to encourage sustainable investments so as to build an economy

that is resilient in the face of climate-related uncertainties.

Benefits implementing the
recommendations
Some of the potential benefits associated with implementing the Task Force’s recommendations include:

easier or better access to capital by increasing investors’ and lenders’ confidence

that the company’s climate-related risks are appropriately assessed and managed

more effectively meeting existing disclosure requirements to report material

information in financial filings

increased awareness and understanding of climate-related risks and opportunities

within the company resulting in better risk management and more informed

strategic planning

proactively addressing investors’ demand for climate-related information in a

framework that investors are increasingly asking for, which could ultimately reduce

the number of climate-related information requests received

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