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 recommendations summarized below are fully described in the TCFD recommendations report.
Disclose the organization’s governance around climate-related risks and opportunities.
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.
Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material.
a. Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.
b. Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning.
c. Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.
Disclose how the organization identifies, assesses, and manages climate-related risks.
a. Describe the organization’s processes for identifying and assessing climate-related risks.
b. Describe the organization’s processes for managing climate-related risks.
c. Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management.
Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.
a. Disclose the metrics used by the organization 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 organization to manage climate-related risks and opportunities and performance against targets.
Principles for effective disclosure
To help achieve high-quality disclosures that enable users to understand the impact of climate change on organizations, the Task Force recommends that firms consider seven principles for effective disclosure.
Disclosure should represent relevant information
Disclosure should be specific and complete
Disclosure should be clear, balanced, and understandable
Disclosure should be consistent over time
Disclosure should be comparable among companies within a sector industry or portfolio
Disclosure should be reliable, verifiable, and objective
Disclosure should be provided on a timely basis
The Task Force recommends that organizations describe the resilience of their strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario, where such information is material.
Scenario analysis is a process for identifying and assessing the potential implications of a range of plausible future states under conditions of uncertainty. Scenarios are hypothetical constructs and not designed to deliver precise outcomes or forecasts. Instead, scenarios provide a way for organizations to consider how the future might look if certain trends continue or certain conditions are met.