Task Force on Climate-Related Financial Disclosures (TCFD)
The Importance of TCFD in Sustainability Reporting
The Task Force on Climate-Related Financial Disclosure (TCFD) has become the leading global business framework for climate risk management and climate-related financial disclosures. TCFD was formed through an international multi-stakeholder process as a result of the Financial Stability Board’s (FSB) review of how the financial sector can best take account of climate issues.
TCFD offers a framework for reporting on climate-related financial risks and opportunities in a consistent manner that provides the comparable information needed for investors, raters and rankers, lenders, and other stakeholders to make decisions. TCFD includes recommendations for companies to build their climate governance capacities, understand their exposure to the climate-related risks that can impact their bottom line, and manage those risks.
From Voluntary to Mandatory Climate Risk Disclosures
While TCFD is largely a voluntary initiative today, it is rapidly being adopted internationally by publicly traded companies and is currently being integrated into regulatory frameworks.
- Signatories of the UN Principle of Responsible Investment (PRI) are now required to report in line with specific TCFD recommendations.
- In 2021, the G7 countries agreed to move forward within their respective jurisdictions toward mandatory disclosure of climate-related risks.
- The UK will be the first to mandate disclosures in line with the TCFD and the European Union’s adoption of the Corporate Sustainability Reporting Directive anticipates TCFD alignment.
- The United States Securities and Exchange Commission (SEC) proposed rule on climate-related disclosures is strongly aligned with TCFD. A final rule is anticipated in 2023.
- The International Sustainability Standards Board (ISSB), which sits alongside the International Accounting Standards Board (IASB) is integrating TCFD into a common set of standards, which is anticipated to provide the bedrock of further country-level regulatory development.
How Can Advisory Support from SCS Help?
SCS Consulting works with companies of all sizes to determine how the TCFD framework can best optimize their sustainability governance structure and offers expertise on how best to leverage TCFD toward meeting the disclosure requirements that have investor and rating implications.
SCS Consulting provides a fully collaborative partnership experience where we join each client wherever they are on their sustainability journey. Our team of advisors helps you take the appropriate next step:
- Discovery: We work with you to undertake a comprehensive Needs and Goals Assessment to understand where you currently align with TCFD, and to inform strategy and implementation plans.
- Knowledge & Capacity-Building: We provide your team with training to understand TCFD’s core principles and recommendations and the value and objective of specific undertakings, such as scenario analysis. We work with your teams on capacity-building, and facilitation support along the way, including board oversight, financial planning, and management practices.
- Risk Management: We guide your team through the risk and opportunity assessment process with a focus on both qualitative and quantitative risks, including completing scenario analysis on material issues.
- Strategy Development: We support the development of a TCFD strategy and roadmap to mitigate risk and build operational resilience over the short, medium, and long term, which includes metrics, targets, and transitional planning.
- TCFD Disclosures: We help to integrate TCFD disclosures into your current ESG reporting framework or help to create a TCFD-aligned report that can be used for company management reporting and investor communications.
SCS Consulting offers a turnkey TCFD advisory and reporting service that can accurately account for your company’s overall climate-related risk exposure and meet disclosure expectations.