TCFD Recommendations
Overview
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.
Governance
Disclose the organization’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 organization’s businesses, strategy, and financial planning where such information is material.
Recommended disclosures
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.
Risk Management
Disclose how the organization identifies, assesses, and manages climate-related risks.
Recommended disclosures
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.
Recommended disclosures
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.
1
Disclosure should represent relevant information
2
Disclosure should be specific and complete
3
Disclosure should be clear, balanced, and understandable
4
Disclosure should be consistent over time
5
Disclosure should be comparable among companies within a sector industry or portfolio
6
Disclosure should be reliable, verifiable, and objective
7
Disclosure should be provided on a timely basis
Scenario analysis
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.
Task Force members discuss scenario analysis.