Developing Climate-related Financial Disclosures
Policymakers have an interest in ensuring that the financial system is resilient to all forms of risk. In April 2015 the G20 asked the FSB to consider climate risk and in December 2015 the FSB launched the industry-led Task Force on Climate-related Financial Disclosures (TCFD) to develop recommendations on climate-related financial disclosures. The Task Force published its final recommendations in June 2017.
Disclosure of climate-related financial information is a prerequisite for financial firms not only to manage and price climate risks appropriately but also, if they wish, to take lending, investment or insurance underwriting decisions based on their view of transition scenarios.
Michael R. Bloomberg is Chair of the Task Force, which includes users and providers of disclosures from a wide range of backgrounds. The 32 industry members of the Task Force, who are drawn from a wide range of industries and countries from around the globe, finalised the recommendations after extensive public engagement and consultation, including public consultation on a draft of the recommendations in December 2016. Once implemented the recommendations will facilitate consistent, comparable, reliable, clear and efficient climate-related disclosures by companies. The recommendations apply broadly to financial and non-financial firms.
The TCFD developed four recommendations on climate-related financial disclosures that are applicable to organisations. The recommendations are structured around four thematic areas:
- Governance: The organisation’s governance around climate-related risks and opportunities.
- Strategy: The actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning.
- Risk Management: The processes used by the organisation 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.
More details about the Task Force are available on the TCFD website.