Taskforce on Climate-related Financial Disclosures (TCFD)

Summary

  • Created in 2015 by the Financial Stability Board (FSB).
  • The TCFD is chaired by Michael Bloomberg and consists of 31 members who are all selected by the FSB. Members are from both users and preparers of disclosures, representing a wide swath of the G20.
  • The TCFD has developed a framework to help organisations effectively disclose climate-related risks and opportunities.

Objectives

  1. To develop consistent climate-related financial risk disclosures, in providing information to investors and stakeholders.
  2. To provide consistent and transparent information to global markets.
  3. To enable investors to make better-informed decisions when evaluating risk over the short, medium and long term.

Recommendations

The taskforce’s recommendations called for companies to disclose:

  • governance around climate-related risks and opportunities
  • the impact of climate-related risks and opportunities on business strategy
  • the assessment and management of climate-related risk
  • the metrics and targets used to assess and manage climate-related risks.

Implications for the investment management industry

  • Risk assessment: financial advisers can effectively assess climate-related risks to potential investment companies, their suppliers and their competitors.
  • Strategic planning: financial advisers can make better evaluations when considering risks and exposures over the short, medium and long term.
  • The Transition Pathway Initiative (TPI) believes TCFD’s positioning of the implied temperature rise metric will lead to carbon-washing of portfolios and will place a needless cost to asset owners in the long term.