Since its inception in 2015, almost 3,000 organisations globally have expressed public support for the Financial Stability Board (FSB)’s Task Force on Climate-related Financial Disclosures (TCFD) and its eleven recommendations.
In the push to harmonise the alphabet soup of ESG standards and frameworks, the TCFD has established itself as the frontrunner of frameworks. With the United Kingdom being the first G20 nation to require compulsory TCFD disclosures for companies and many more following or soon to. The newly formed International Sustainability Standards Board (ISSB) has also confirmed its sustainability reporting standards will follow the same four-pillar approach.
What’s certain is the sustainability world is behind TCFD, is your organisation ready to be as well?
Beyond the issue of mandatory compliance, aligning your reporting to the TCFD satisfies investor and wider stakeholders demands for greater transparency on climate-related risks and opportunities. Some investors are already expecting TCFD aligned disclosures regardless. For example, BlackRock is making it mandatory for all investee companies and its CEO, Larry Fink, wrote in his 2022 letter that he believes the TCFD’s recommendations are “essential tools for understanding a company’s ability to adapt for the future”.
Become a part of the climate change solution
The Task Force’s recommendations were originally focussed on financial sector organisations – but only 50% of organisations now overtly supporting the TCFD’s recommendations are in banking, insurance and asset management.
Instead, leaders across energy, manufacturing, property, logistics and agricultural products are storming ahead to demonstrate the seriousness their businesses attach to climate-related risks and the wider financial threat it presents to the global economy. No matter what sector your business is in, aligning with TCFD could and should be the next step for you.
The TCFD comprises eleven specific recommendations, which are ordered under four pillars: Governance, Strategy, Risk management and Metrics & targets. Within each of these pillars sits a set of recommendations. For a disclosure to be regarded as TCFD-aligned, it is required that it must satisfy each of the eleven recommendations.
The TCFD recommendations are as follows:
|Governance||Describe the board’s oversight of climate-related risks and opportunities.|
|Describe management’s role in assessing and managing climate-related risks and opportunities.|
|Strategy||Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term.|
|Describe the impact of climate-related risks and opportunities on the organization’s business, strategy, and financial planning.|
|Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.|
|Risk management||Describe the organisation’s processes for identifying and assessing climate-related risks.|
|Describe the organization’s process for managing climate-related risks.|
|Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management.|
|Metrics & targets||Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process.|
|Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.|
|Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.|
Organisations aligning to TCFD can expect to benefit through:
A strong set of TCFD-aligned disclosures must be company-specific and as a result, our offering to assist in your TCFD alignment is bespoke to your individual needs. Here are some of the ways we could assist with your TCFD requirements:
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To fully understand the risks and opportunities climate change may have on the business, Avieco supported SThree in developing climate scenarios, allowing SThree to identify climate risks and opportunities within individual regions.
It highlighted the effects of climate change and the potential consequences within their specific markets and STEM sectors they operate within. And more importantly, the developed scenarios then informed strategic decisions around how SThree would respond to those risks and opportunities at any point in the future.
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