The Task Force on Climate-Related Financial Disclosures (TCFD) was established in December 2015 by the Financial Stability Board (FSB) to develop recommendations for more effective climate-related disclosures. These recommendations aim to provide consistent and transparent information to investors, lenders, and insurance underwriters, facilitating informed decision-making regarding climate-related risks and opportunities.
Key aspects of the TCFD include:
- Four Core Elements: The TCFD's recommendations are structured around four thematic areas:
- Governance: The organization's governance around climate-related risks and opportunities.
- Strategy: The actual and potential impacts of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning.
- Risk Management: The processes used by the organization to identify, assess, and manage climate-related risks.
- Metrics and Targets: The metrics and targets used to assess and manage relevant climate-related risks and opportunities.
- Global Adoption: Since their release in 2017, the TCFD recommendations have been widely endorsed and adopted by organizations and governments worldwide, enhancing market transparency and supporting the transition to a more sustainable, low-carbon economy.
- Integration into IFRS Foundation: In October 2023, the TCFD fulfilled its remit and disbanded. The FSB has asked the International Financial Reporting Standards (IFRS) Foundation to take over the monitoring of the progress of companies’ climate-related disclosures.
By following the TCFD framework, organizations can improve their reporting of climate-related financial information, enabling stakeholders to better understand the financial implications of climate change and make more informed capital allocation decisions.
