Task Force on Climate-Related Financial Disclosures (TCFD)

TCFD stands for Task Force on Climate-Related Financial Disclosures. It was formed after a review by the Financial Stability Board (FSB) into how the financial sector can best take account of climate-related issues. It is the first international initiative to examine climate change in a financial stability context.

The TCFD’s aim is to develop consistent climate-related financial risk – and opportunity – disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. The TCFD framework is being adopted internationally at a rapid pace and has become the backbone of climate-related disclosure, companies now have to demonstrate TCFD alignment over a brief period.

Anthesis is proud to have joined over 1000 leading global organisations in becoming a Supporter of the TCFD.

The value of the TCFD

Join members of the Anthesis TCFD team as they discuss the value that will be driven for companies reporting in line with the requirements of the TCFD.

The TCFD has considered the physical, liability and transition risks to an organisation and its assets associated with climate change and what constitutes effective financial disclosures across industries. TCFD helps companies to understand what financial markets want from disclosure in order to measure and respond to climate change risks, and to encourage firms to align their disclosures with investors’ needs.

Although a voluntary initiative, the TCFD mirrors a general trend for governments and central banks to increasingly require the disclosure of specific climate and wider sustainability related metrics and information.

Reporting in line with some of the TCFD’s recommendations is also now a mandatory requirement for signatories of the UN Principles of Responsible Investment (PRI).

TCFD Requirements

In 2021, G7 countries backed moves to force banks and companies to disclose their exposure to climate-related risks. The UK will become the first G20 country to make it mandatory for businesses to disclose climate-related risks and opportunities in line with the TCFD. A move which has accelerated the government’s commitment to make the UK financial system the greenest in the world.

This change to the system is viewed as a vital step in safe-guarding the financial system from climate change shocks.

Central banks and other financial regulators often feel left in the dark due to a lack of data around how exposed businesses on their territories are to climate risk. The new requirements will help investors and organisations to better understand the impact of climate change, and support pricing of climate-risks more accurately. The beauty of TCFD recommendations is that it provides a uniform way to assess how a changing climate may impact business strategy.

Mandatory Climate Disclosures in the US & UK

 

Since 2020, PRI signatories have been required to report to the PRI on several indicators regarding their management of risks and opportunities related to climate change. These indicators are modelled on the disclosure framework of the Financial Stability Board’s Task Force on Climate-related Disclosures (TCFD).

IN 2021, PRI signatories must disclose the organisation’s governance around climate-related risks and opportunities.

Recommended disclosures include:

  • Describing the board’s oversight of climate-related risks and opportunities
  • Describing management’s role in assessing and managing climate-related risks and opportunities

As of August 2021, this information does not need to be disclosed publicly as a standalone report or even as part of an annual report, although this is likely to follow as a requirement in the coming years. For now, a PRI signatory simply needs to disclose its governance structure within its PRI submission.

Nevertheless, the maturity of an organisation’s disclosure can range from limited to full disclosure. Therefore, it is important that the organisation is clear in explaining management’s role and any measures in place to increase board knowledge, and considers climate-related risks and opportunities from a physical, transitional and/or liability perspective.

As governments release more detailed information on compliance, such as the UK who are set to release details from late 2021, a full compliance check cannot yet be undertaken as the TCFD scheme remains a voluntary initiative for many. Additionally, PRI are yet to confirm the exact details for 2022/2023 disclosure

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How Anthesis can support you to report in line with TCFD

Understanding climate-related risks and building them into financial reporting is undoubtedly challenging. But the methods and tools that enable organisations to do so are maturing rapidly, as are the expectations of investors and regulators for better information. Companies that fail to grasp this agenda now face a range of risks and uncertainties. 

Anthesis believes that by investing in and implementing the right governance, risk management and strategic planning processes, companies can become more resilient to the risks associated with climate change and potentially also the opportunities posed. Through effective reporting, they will be in a strong position to make better decisions for their future business, as well as fully informing those stakeholders who have an interest in their activities. 

We believe now is the time to act and we are well positioned to support clients with implementing the TCFD and their wider climate change strategies via assistance with: 

  • developing the wider climate change awareness and management frameworks within an organisation, often as part of a wider environmental, social and governance (ESG) program. 
  • evaluating the climate-related risks and opportunities associated with an organisation and its strategy, including completing the scenario analysis on its material issues.
  • developing climate risk mitigation strategies and programmes. 
  • data identification, collection, analysis and reporting, including the calculation of an organisation’s Scope 1, 2 and 3 GHG emissions. 

TCFD Services

We will help you understand what your organisation already discloses that is TCFD-aligned, and how you stack up against the maturity of your peers’ disclosures and best-practices. Anthesis can support your company in developing a multi-year roadmap for an increasingly mature TCFD reporting and corresponding strategy that is in line with TCFD guidance and exemplifies climate leadership.

Anthesis can provide guidance on management and board-level oversight structures, change management, data governance, regular disclosure cycles and climate education. We can provide tailored climate education for stakeholders and upskill your entire workforce to build support and buy in at every level.

We offer industry-leading, data-driven climate modeling capabilities to conduct scenario analysis and stress testing, which will help your company better understand how its exposure to key climate related physical and transition risks may change over time and under many future climate worlds.

Anthesis will provide guidance on climate change mitigation and adaptation strategies. Our in-house experts and external partners will help develop strategies to identify and implement solutions to build climate resilience as it relates to renewable energy, water management, net zero, lifecycle assessment, supplier engagement and other relevant climate risk mitigation efforts.

We will integrate all your climate-related data and insights to produce comprehensive disclosures in alignment with TCFD recommendations, so your company is prepared to report publicly in alignment with the TCFD framework, whether through your annual ESG report, Form 10-K or corporate disclosure.