TCFD Recommendations and Why They May Help Drive Investment

November 20, 2017 | News,

With the latest round of global climate talks coming to an end at COP23 in Bonn on Friday, there has never been a bigger focus on how to implement the Paris Agreement from both a governmental and business perspective. There is no better time for businesses to act decisively in understanding the climate-related risks and opportunities they face and reduce the impact they have. It is also time for stakeholders, particularly investors, to weigh climate risk in the decisions they make.

Businesses have been publishing this information, to a greater or lesser extent, voluntarily for many years now. The Carbon Disclosure Project (CDP) have been collecting this information on behalf of investors since 2002, while Global Reporting Initiative (GRI) sets out comprehensive indicators around climate change and risk for inclusion in sustainability reports.

Why Now for the TCFD Recommendations?

On the surface it may seem difficult to get excited about the fact that the Task Force on Climate-related Financial Disclosures (TCFD) published their final recommendations in June 2017. If anything, they seem late to the table.

However, led by the Financial Stability Board (FSB) – a group made up of national banks and regulators from G20 countries and other key financial centres – and commissioned by the G20, the TCFD’s recommendations come with an impressive pedigree of supporters.

The aim of the recommendations is to ensure organizations provide “the information needed by investors, lenders, and insurance underwriters to appropriately assess and price climate-related risks and opportunities”.

Their recommendations are designed to be adoptable by all organizations and to solicit useful, forward looking information on financial impacts with a strong focus on risks and opportunities. This is reflected by the themes of the recommended disclosures of governance, strategy, risk management, and metrics and targets.

Main Differences in the Task Force’s Recommendations

So far, so what you may be thinking. However, these new recommendations hold two key differences:

  • The weight of the organisation behind them – as well as the weight of the Financial Stability Board, lots of investors have signed up to them including ‘Financial institutions responsible for assets of around $25trn (€22trn), including major pension investors’.
  • The recommendation that these disclosures should be included in mainstream financial filings. TCFD rightly argue that climate change is going to impact businesses fundamentally and so businesses should report on their response to it as material to their future performance. This recommendation coming from an international financial body of such standing could be game-changing.

The TCFD requirements are clearly designed to meet investor needs, so can help businesses engage and meet these stakeholders’ needs. With the strong focus on future proofing the business and reducing risk, the recommendations can also help businesses derive additional value and understanding from the reporting process.

Organizations already reporting climate related information under other frameworks may be able to disclose under this framework immediately and are strongly encouraged to do so.

It is worth noting that the CDP is fully supportive of the TCFD recommendations and has committed to adopt them into their disclosure platform. So, let’s hope that rather than another initiative muddying the water this can be the point to bring climate-related reporting into the mainstream, and at the same time consolidate and focus it so businesses can concentrate more of their energies on doing something about it.

How Anthesis can help you with climate-related reporting

Anthesis can help you manage, develop and report on your approach to climate change. Our services include support responding to CDP and TCFD, development of science based targets, integrated reporting and materiality. We can also help manage and prioritize the myriad of reporting frameworks with our pragmatic sustainability reporting approach.

For more information on anything mentioned in the blog or to discuss your climate-related reporting, please contact Alex McKay.

Other blogs you may like:

Contact us

We'd love to hear from you

Anthesis has offices in the U.S., Canada, UK, France, the Netherlands, Belgium, South Africa, Ireland, Italy, Germany, Sweden, Spain, Portugal, Andorra, Finland, Colombia, Brazil, China, the Philippines and the Middle East.